Federal Register Vol. 81, No.251,

USGSA authorizes the Secretary of Agriculture to provide official grain inspection and weighing services and to charge and collect reasonable fees for performing these services. The fees collected are to cover, as nearly as practicable, GIPSA's costs for performing these services, including associated administrative and supervisory costs. The fees are in the regulations at 7 CFR 800.71.

On July 29, 2016, GIPSA published in the Federal Register (81 FR 49855) a final rule amending 7 CFR 800.71 in accordance with the Reauthorizations Act of 2015, which required GIPSA to calculate fees assessed on tonnage based on the 5-year rolling average of export tonnage volume (§ 800.71) and adjust all Schedule A fees annually to maintain a 3 to 6 month operating reserve for inspection and supervision services (§ 800.71).

GIPSA has conducted the annual review of the fees and operating reserve for the purposes of the annual adjustment of the fees. Accordingly, GIPSA is setting new tonnage fees which will take effect on January 1, 2017, for all field offices. GIPSA has determined that a 5 percent reduction in all Schedule A fees, including the aforementioned tonnage fees, is necessary to attain the goal of 41/2 months of operating reserve.

The regulations require GIPSA annually review the national tonnage fees, local tonnage fees, and fees for service. After calculating the tonnage fees according to the regulatory formula in section 800.71(b)(1), GIPSA then reviews the amount of funds in the operating reserve at the end of the fiscal year (FY2016 in this case) to ensure that it has 41/2 months of operating expenses as required by section 800.71(b)(2) of the regulations. If the operating reserve has more, or less than 41/2 months of operating expenses, then GIPSA must adjust all Schedule A fees. For each $1,000,000, rounded down, that the operating reserve varies from the target of 41/2 months, GIPSA will adjust all Schedule A fees by 2 percent. If the operating reserve exceeds the target, all Schedule A fees will be reduced. If the operating reserve does not meet target, all Schedule A fees will be increased. The maximum annual increase or decrease in fees is 5 percent (§ 800.71(b)(2)(i)-(ii)).

(a) Tonnage fees for the 5-year rolling average tonnage were calculated on the previous 5 fiscal years 2012, 2013, 2014, 2015, and 2016. Tonnage fees consist of the national tonnage fee and local tonnage fee and are calculated and rounded to the nearest $0.001 per metric ton. The tonnage fees are calculated as following:

(1) National tonnage fee. The national tonnage fee is the national program administrative costs for the previous fiscal year divided by the average yearly tons of export grain officially inspected and/or weighed by delegated States and designated agencies, excluding land carrier shipments to Canada and Mexico, and outbound grain officially inspected and/or weighed by FGIS during the previous 5 fiscal years.

The national program administrative costs for fiscal year 2016 were $7,214,466. The fiscal year 2017 national tonnage fee, prior to the operating reserve review, is calculated to be at $0.067 per metric ton.

(2) Local tonnage fee. The local tonnage fee is the field office administrative costs for the previous fiscal year divided by the average yearly tons of outbound grain officially inspected and/or weighed by the field office during the previous 5 fiscal years.

The field offices fiscal year tons for the previous 5 fiscal years and calculated 5-year rolling average are as follows:

The local field office administrative costs for fiscal year 2016 and the fiscal year 2017 calculated local field office tonnage fee, prior to the operating reserve review, are as follows:

(3) Operating reserve. In order to maintain an operating reserve not less than 3 and not more than 6 months, GIPSA reviewed the value of the operating reserve at the end of FY2016 to ensure that an operating reserve of 41/2 months is maintained.

The program operating reserve at the end of fiscal year 2016 was $18,863,026 with a monthly operating expense of $3,295,937. The target of 4.5 months of operating reserve is $14,831,717 therefore the operating reserve is greater than 4.5 times the monthly operating expenses by $4,031,311. For each $1,000,000, rounded down, above the target level, all Schedule A fees must be reduced by 2 percent. The operating reserve is $4 million above the target level resulting in a calculated 8 percent reduction. As required by 800.71(b)(2)(ii), the reduction is limited to 5 percent. Therefore, GIPSA is reducing all Schedule A fees for service in Schedule A in paragraph (a)(1) by the maximum 5 percent. All Schedule A fees for service are rounded to the nearest $0.10, except for fees based on tonnage or hundredweight.

For the reasons set out in the preamble, GIPSA amends 7 CFR part 800 as follows:

This rule is issued under Marketing Agreement and Order No. 983, both as amended (7 CFR part 983), regulating the handling of pistachios grown in California, Arizona, and New Mexico, hereinafter referred to as the “order.” The order is effective under the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the “Act.”

The Department of Agriculture (USDA) is issuing this rule in conformance with Executive Orders 12866, 13563, and 13175.

Under the order, pistachio handlers in California, Arizona, and New Mexico are subject to assessments, which provide funds to administer the order. Assessment rates issued under the order are intended to be applicable to all assessable pistachios grown in the production area for the entire production year, and continue indefinitely until amended, suspended, or terminated. The Committee's production year begins on September 1, and ends on August 31.

In an interim rule published in the Federal Register on September 16, 2016, and effective on September 19, 2016, (81 FR 63679, Doc. No. AMS-SC-16-0076, SC16-983-2 IR), § 983.253 was amended by decreasing the assessment rate established for pistachios grown in the production area for the 2016-2017 and subsequent production years from $0.0035 to $0.0010 per pound. The decrease in the per pound assessment rate allows the Committee to maintain its financial reserve while still providing adequate funding to meet program expenses.

Pursuant to requirements set forth in the Regulatory Flexibility Act (RFA) (5 U.S.C. 601-612), the Agricultural Marketing Service (AMS) has considered the economic impact of this rule on small entities. Accordingly, AMS has prepared this final regulatory flexibility analysis.

The purpose of the RFA is to fit regulatory actions to the scale of businesses subject to such actions in order that small businesses will not be unduly or disproportionately burdened. Marketing orders issued pursuant to the Act, and the rules issued thereunder, are unique in that they are brought about through group action of essentially small entities acting on their own behalf.

There are approximately 1,152 producers of pistachios in the production area and 19 handlers subject to regulation under the marketing order. The Small Business Administration defines small agricultural producers as those having annual receipts less than $750,000, and small agricultural service firms as those whose annual receipts are less than $7,500,000. (13 CFR 121.201)

The National Agricultural Statistics Service (NASS) 2012 data on pistachio farm size indicates that there were 1,305 pistachio farms, of which 1,125 were less than 250 acres. That is, 87 percent were too small to have annual receipts of $750,000. NASS 2015 annual production data indicates that the per-acre production of pistachios was 1,160 pounds. At an average value of $2.54 per pound, each acre of pistachios could return $2,948.40. In order for a producer to have $750,000 in annual receipts, the producer would have to have at least 255.3 acres. Thus, the majority of handlers and producers in the production area may be classified as small entities.

Based on Committee data, it is estimated that about 53 percent of the handlers annually ship less than $7,500,000 worth of pistachios. Nine of the 19 regulated handlers (47 percent) received enough pistachios at an average price of $3.00 pound to be considered large handlers, leaving the percentage of small handlers at 53 percent.

This rule continues in effect the action that decreased the assessment rate established for the Committee and collected from handlers for the 2016-17 and subsequent production years from $0.0035 to $0.0010 per pound of pistachios handled. The Committee unanimously recommended 2016-17 expenditures of $922,500 and an assessment rate of $0.0010 per pound of pistachios, which is $0.0025 lower than the 2015-16 rate. The quantity of assessable pistachios for the 2016-17 production year is estimated at 750 million pounds. Thus, the $0.0010 rate should provide $750,000 in assessment income. Income derived from handler's assessments, along with interest and funds from the Committee's authorized reserve, should be adequate to cover expenses for the 2016-17 production year.

This rule continues in effect the action that decreased the assessment obligation imposed on handlers. Assessments are applied uniformly on all handlers, and some of the costs may be passed on to producers. However, decreasing the assessment rate reduces the burden on handlers, and may reduce the burden on producers.

In addition, the Committee's meeting was widely publicized throughout the pistachio area of production and all interested persons were invited to attend the meeting and participate in Committee deliberations on all issues. Like all Committee meetings, the July 12, 2016, meeting was a public meeting and all entities, both large and small, were able to express views on this issue.

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35), the order's information collection requirements have been previously approved by the Office of Management and Budget (OMB) and assigned OMB No. 0581-0278. No changes in those requirements as a result of this action are necessary. Should any changes become necessary, they would be submitted to OMB for approval.

This action imposes no additional reporting or recordkeeping requirements on either small or large pistachio handlers. As with all Federal marketing order programs, reports and forms are periodically reviewed to reduce information requirements and duplication by industry and public sector agencies.

USDA has not identified any relevant Federal rules that duplicate, overlap or conflict with this rule.

Comments on the interim rule were required to be received on or before November 15, 2016. No comments were received. Therefore, for reasons given in the interim rule, we are adopting the interim rule as a final rule, without change.

To view the interim rule, go to: https://www.regulations.gov/docket?D=AMS-SC-16-0076.

This action also affirms information contained in the interim rule concerning Executive Orders 12866, 12988, 13175, and 13563; the Paperwork Reduction Act (44 U.S.C. Chapter 35); and the E-Gov Act (44 U.S.C. 101).

After consideration of all relevant material presented, it is found that finalizing the interim rule, without change, as published in the Federal Register (81 FR 63679, September 16, 2016) will tend to effectuate the declared policy of the Act.

The FOIA was enacted to give the public a right to access records held by the executive branch that, although not classified, were not otherwise available to them. Since its enactment in 1966, the FOIA has been amended on a number of occasions to adapt to the times and changing priorities.

On June 30, 2016, the FOIA Improvement Act of 2016, Public Law 114-185, 130 Stat. 538 (the Act) was enacted. The Act specifically requires all agencies to review and update their FOIA regulations in accordance with its provisions. The Act addresses a range of procedural issues, including requiring that agencies establish a minimum of 90 days for requesters to file an administrative appeal and that they provide dispute resolution services at various times throughout the FOIA process. The Act also amends Exemption 5, codifies the foreseeable harm standard, and adds two new elements to agency Annual FOIA Reports.

The NRC has identified the areas where the revisions are necessary in order to comply with the Act and is amending parts 2 and 9 of title 10 of the Code of Federal Regulations (10 CFR) accordingly.

The following paragraphs describe the specific changes adopted by this rulemaking.

This final rule revises paragraph (a)(5) to be identical to 10 CFR 9.17(a)(5), which this final rule is also revising to include new criteria for FOIA Exemption 5. The Act amended Exemption 5 of the FOIA to provide that the deliberative process privilege does not apply to records that are 25 years or older before the date on which they are requested.

This final rule revises paragraph (a)(5) to include new criteria for FOIA Exemption 5. The Act amended Exemption 5 of the FOIA to provide that the deliberative process privilege does not apply to records that are 25 years or older before the date on which they are requested. This final rule redesignates paragraph (c) as paragraph (d) without change and adds a new paragraph (c) to incorporate the foreseeable harm standard that the Act codified and to include clarifying language derived from the Act about the FOIA's relationship to laws prohibiting disclosure of information.

This final rule revises paragraph (b)(1) to change the reference § 9.17(a) to § 9.17, to account for the foreseeable harm threshold standard in the revised § 9.17(c) that applies to the exemptions listed in § 9.17(a).

This final rule revises paragraph (c) introductory text to include available viewing formats. This final rule revises paragraph (c)(5) to include copies of records regardless of format, as well as adding paragraphs (c)(5)(i), (c)(5)(ii), (c)(5)(ii)(A) and (c)(5)(ii)(B). This revision is to codify frequently requested records.

This final rule revises paragraph (c) to include requirements to make the NRC's FOIA Public Liaison available to assist in resolving any disputes and to notify the requester of the right to seek dispute resolution services from the Office of Government Information Services (OGIS). This final rule revises paragraph (f) to change the reference to § 9.17(a) to § 9.17, to account for the foreseeable harm threshold standard in the revised § 9.17(c) that applies to the exemptions listed in § 9.17(a).

This final rule (1) revises paragraph (a) to include a new requirement to notify the requester of the right to seek assistance from the NRC's FOIA Public Liaison; (2) revises paragraph (b)(5) to notify the requester they now have 90 calendar days to appeal; (3) adds paragraph (b)(6) to include a new requirement to notify the requester of the right to seek assistance from the NRC's FOIA Public Liaison; and (4) adds paragraph (b)(7) to include a new requirement to notify the requester of the right to seek dispute resolution services from the NRC's FOIA Public Liaison or OGIS.

This final rule revises paragraph (a) to change the length of time to appeal from 30 calendar days to 90 calendar days.

This final rule adds new section 10 CFR 9.30 to include contact information for obtaining dispute resolution services from OGIS and the NRC's FOIA Public Liaison.

This final rule adds new paragraph (f) to include new fee limitations for search and duplication.

This final rule revises paragraph (d) to change the length of time to appeal from 30 calendar days to 90 calendar days.

This final rule (1) revises the section heading to include the Director of OGIS as a recipient of the annual FOIA report; (2) revises paragraph (a) to include the Director of OGIS as a recipient of the annual FOIA report and to replace the incomplete list of required contents of the report found in paragraphs (a)(1)-(8) with a reference to 5 U.S.C. 552(e)(1), which contains the full list of required contents of the report; and (3) revises the link where you can locate the NRC's annual FOIA reports.

Under the Administrative Procedure Act (5 U.S.C. 553(b)), an agency may waive the normal notice and comment requirements if it finds, for good cause, that they are impracticable, unnecessary, or contrary to the public interest. As authorized by 5 U.S.C. 553(b)(3)(B), the NRC finds good cause to waive notice and opportunity for comment on the amendments. Notice and opportunity for comment are unnecessary, because the NRC is issuing this final rule for the limited purpose of complying with specific direction in the Act requiring agencies to update their FOIA regulations in accordance with the Act, and the final rule updates the NRC's FOIA regulations only as necessary to bring them into compliance with the Act.

The Plain Writing Act of 2010 (Pub. L. 111-274) requires Federal agencies to write documents in a clear, concise, and well-organized manner. The NRC has written this document to be consistent with the Plain Writing Act as well as the Presidential Memorandum, “Plain Language in Government Writing,” published June 10, 1998 (63 FR 31883).

The NRC has determined that this final rule is the type of action described in categorical exclusion 10 CFR 51.22(c)(1). Therefore, neither an environmental impact statement nor an environmental assessment has been prepared for this final rule.

This final rule does not contain a collection of information as defined in the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) and, therefore, is not subject to the requirements of the Paperwork Reduction Act of 1995.

This final rule is a rule as defined in the Congressional Review Act (5 U.S.C. 801-808). However, the Office of Management and Budget has not found it to be a major rule as defined in the Congressional Review Act.

For the reasons set out in the preamble and under the authority of the Atomic Energy Act of 1954, as amended; the Energy Reorganization Act of 1974, as amended; and 5 U.S.C. 552 and 553, the NRC is adopting the following amendments to 10 CFR parts 2 and 9:

Table of Contents I. Discussion II. Rulemaking Procedure III. Section-By-Section Analysis IV. Regulatory Flexibility Certification V. Regulatory Analysis VI. Backfit and Issue Finality VII. Plain Writing VIII. National Environmental Policy Act IX. Paperwork Reduction Act X. Congressional Review Act I. Discussion

The NRC's regulations in part 140 of title 10 of the Code of Federal Regulations (10 CFR), “Financial Protection Requirements and Indemnity Agreements,” provide requirements and procedures for implementing the financial protection requirements for certain licensees and other persons under the Price-Anderson Act, incorporated as Section 170 of the Atomic Energy Act of 1954, as amended (AEA). The Price-Anderson Act states that, for each nuclear reactor that is licensed to operate, is designed for the production of electrical energy, and has a rated capacity of 100,000 electrical kilowatts or more (henceforth referred to as large operating reactors), “the amount of primary financial protection required shall be the maximum amount available at reasonable cost and on reasonable terms from private sources.” (Section 170(b) of the AEA) This requirement of the Price-Anderson Act is implemented in the NRC's regulations at § 140.11(a)(4), “Amounts of financial protection for certain reactors.” The current maximum amount of primary financial protection available from private sources is $375 million. Therefore, § 140.11(a)(4) currently requires large commercial operating reactors to have and maintain primary nuclear liability insurance in the amount of $375 million.

On June 15, 2016, American Nuclear Insurers (ANI), the underwriter of American nuclear liability policies, acting on behalf of its member companies, notified the NRC that it will be increasing “its maximum available primary nuclear liability limit from $375 million to $450 million, effective on January 1, 2017” (ADAMS Accession No. ML16239A254). The ANI makes such adjustments on a non-periodic basis. The last such adjustment was made in 2010, and the NRC revised § 140.11 to reflect the increased maximum available amount of primary nuclear liability insurance (75 FR 16645; April 2, 2010).

To implement this adjustment, in accordance with the Price-Anderson Act, the NRC is revising 10 CFR part 140 to require large operating reactors to have and maintain $450 million in primary financial protection.

The NRC is not currently revising the appendices in § 140.91, § 140.92, or § 140.93 that provide general forms of liability policies and indemnity agreements that were determined to be acceptable to the Commission. These appendices include historical insurance providers and protection amounts for primary liability insurance that are no longer in use (for example, values of $124 million and $36 million from the 1979 final rule (44 FR 20632; April 6, 1979) and values of $200 million, $155 million, and $45 million from the 1989 final rule (54 FR 24157; June 6, 1989)). However, these appendices continue to provide relevant general forms of policies and agreements.

This final rule is being issued without prior public notice or opportunity for public comments. The Administrative Procedure Act (5 U.S.C. 553(b)(B)) does not require an agency to use the public notice and comment process “when the agency for good cause finds (and incorporates the finding and a brief statement of reasons therefore in the rules issued) that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest.” In this instance, the NRC finds, for good cause, that solicitation of public comment on this final rule is unnecessary because the Price-Anderson Act requires a non-discretionary adjustment in the maximum amount required for primary nuclear liability insurance. Requesting public comment on this non-discretionary adjustment, which is required by statute, would not result in a change to the adjusted amount.

The following paragraphs describe the specific changes that are reflected in this final rule.

In paragraph (a)(4), this final rule removes “$375,000,000” and replaces it with the increased maximum amount of primary nuclear liability insurance of “$450,000,000.”

Under the Regulatory Flexibility Act (5 U.S.C. 605(b)), the NRC certifies that this final rule does not have a significant economic impact on a substantial number of small entities. This final rule affects only the licensing and operation of nuclear power plants. The companies that own these plants do not fall within the scope of the definition of “small entities” set forth in the Regulatory Flexibility Act or the size standards established by the NRC (10 CFR 2.810).

A regulatory analysis was not prepared for this final rule because the change in the maximum amount of nuclear liability insurance is mandated by the Price-Anderson Act.

The NRC has determined that the backfit rule does not apply to this final rule. A backfit analysis is not required for this final rule because this amendment is mandated by the Price-Anderson Act.

The Plain Writing Act of 2010 (Pub. L. 111-274) requires Federal agencies to write documents in a clear, concise, and well-organized manner. The NRC has written this document to be consistent with the Plain Writing Act as well as the Presidential Memorandum, “Plain Language in Government Writing,” published June 10, 1998 (63 FR 31883).

The NRC has determined that this final rule is the type of action described in categorical exclusion 10 CFR 51.22(c)(1). Therefore, neither an environmental impact statement nor an environmental assessment has been prepared for this final rule.

This final rule does not contain any new or amended collections of information subject to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.). Existing collections of information were approved by the Office of Management and Budget (OMB), approval number 3150-0039.

The NRC may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the document requesting or requiring the collection displays a currently valid OMB control number.

This final rule is a rule as defined in the Congressional Review Act (5 U.S.C. 801-808). However, the Office of Management and Budget has not found it to be a major rule as defined in the Congressional Review Act.

For the reasons set out in the preamble and under the authority of the Atomic Energy Act of 1954, as amended; the Energy Reorganization Act of 1974, as amended; and 5 U.S.C. 552 and 553, the NRC is adopting the following amendments to 10 CFR part 140.

I. Background II. Method of Calculation III. Summary of Final Rule IV. Final Rulemaking V. Regulatory Review I. Background

In order to improve the effectiveness of CMPs and to maintain their deterrent effect, the Federal Civil Penalties Inflation Adjustment Act of 1990, 28 U.S.C. 2461 note (“the Inflation Adjustment Act”), as further amended by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (Pub. L. 114-74) (“the 2015 Act”), requires Federal agencies to adjust each CMP provided by law within the jurisdiction of the agency. The 2015 Act requires agencies to adjust the level of CMPs with an initial “catch-up” adjustment through an interim final rulemaking and to make subsequent annual adjustments for inflation, notwithstanding 5 U.S.C. 553. DOE's initial catch-up adjustment interim final rule was published June 28, 2016 (81 FR 41790). DOE received no public comments in response to the interim final rule. The interim final rule is today adopted as final without amendment. The 2015 Act also provides that any increase in a CMP shall apply only to CMPs, including those whose associated violation predated such increase, which are assessed after the date the increase takes effect.

In accordance with the 2015 Act, OMB issued a guidance memorandum on the implementation of the 2017 annual adjustment pursuant to the 2015 Act.1 This final rule is issued in accordance with applicable law and the OMB guidance memorandum.

The method of calculating CMP adjustments applied in this final rule is required by the 2015 Act. Under the 2015 Act, annual inflation adjustments subsequent to the initial catch-up adjustment are to be based on the percent change between the October Consumer Price Index for all Urban Consumers (CPI-U) preceding the date of the adjustment, and the prior year's October CPI-U. Pursuant to the aforementioned OMB guidance memorandum, the adjustment multiplier for 2017 is 1.01636. In order to complete the 2017 annual adjustment, each CMP is multiplied by the 2017 adjustment multiplier. Under the 2015 Act, any increase in CMP must be rounded to the nearest multiple of $1.

The following list summarizes DOE authorities containing CMPs, and the penalties before and after adjustment.

In September 2016, the OCC issued a Notice of Proposed Rulemaking (NPRM) to prohibit national banks from dealing or investing in industrial or commercial metals.1 The OCC proposed to: (i) Exclude industrial and commercial metals from the terms “exchange,” “coin,” and “bullion” in the “powers clause” of the National Bank Act at 12 U.S.C. 24(Seventh); and (ii) provide that dealing or investing in industrial or commercial metal is not part of, or incidental to, the business of banking. The proposed prohibitions were generally consistent with recommendations made by the U.S. Senate Permanent Subcommittee on Investigations in 2014,2 as well as recommendations described in a September 2016 report to the U.S. Congress and the Financial Stability Oversight Council (FSOC) prepared by the OCC, the Board of Governors of the Federal Reserve System (“Board”), and the Federal Deposit Insurance Corporation pursuant to section 620 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”).3

A national bank may engage in activities that are part of, or incidental to, the business of banking under 12 U.S.C. 24(Seventh). Section 24(Seventh) lists several activities that are part of the business of banking; for example, it expressly provides that national banks may buy and sell exchange, coin, and bullion. In addition to these enumerated powers, section 24(Seventh) authorizes national banks to exercise all such incidental powers as shall be necessary to carry on the business of banking. National banks also are authorized to engage in any other activities not expressly enumerated in the statute that the Comptroller of the Currency reasonably determines are part of the business of banking.4

In Interpretive Letter 693,5 issued approximately twenty-one years ago, the OCC authorized national banks to buy and sell copper on the grounds that trading copper was becoming increasingly similar to trading gold, silver, platinum, and palladium. The letter observed that copper was traded in liquid markets; that it was traded in a form standardized as to weight and purity; and that the bank seeking authority to engage in the activity traded copper under policies and procedures similar to those that governed the bank's trading of precious metals. The letter concluded that national banks could buy and sell copper under the express authority to buy and sell coin and bullion and as part of or incidental to the business of banking. The scope of the authorization in Interpretive Letter 693 was sufficiently broad to permit national banks to buy and sell copper in the form of cathodes, which are used for industrial purposes.

In the NPRM, the OCC proposed to reconsider the interpretation set forth in Interpretive Letter 693.

Now, the OCC is finalizing the NPRM and revising its regulations to prohibit national banks from dealing and investing in a metal (or alloy), including copper, in a form primarily suited to industrial or commercial use (industrial or commercial metal).6 The OCC has added a divestiture period to the final rule, provided clarifying language to the dealing and investing prohibition for national banks, and clarified federal savings associations' (FSA) authority to engage in activity that is not dealing or investing, but is otherwise finalizing the NPRM as proposed. The final rule: (i) Excludes industrial and commercial metals from the terms “exchange,” “coin,” and “bullion” in 12 U.S.C. 24(Seventh); and (ii) provides that dealing or investing in industrial or commercial metal is not part of, or incidental to, the business of banking. Examples of metals and alloys in a form primarily suited for industrial or commercial use include copper cathodes, aluminum T-bars, and gold jewelry. For the reasons stated in this preamble, the OCC has concluded that dealing or investing in these metals is not appropriate for national banks. The final rule supersedes Interpretive Letter 693.7

The final rule also applies to FSAs. The Home Owners' Loan Act does not expressly authorize FSAs to buy or sell exchange, coin, and bullion.8 While FSAs have incidental authority to buy and sell precious metals in certain cases and to sell gold and silver coins minted by the U.S. Treasury, the OCC has not identified any precedent authorizing FSAs to buy and sell any industrial or commercial metal.9 The OCC does not interpret FSAs' powers to buy and sell metals to be broader than those of national banks.10 To avoid doubt, and to further integrate national bank and FSA regulations, the final rule prohibits FSAs from dealing or investing in industrial or commercial metal.11

The OCC received four comments on the NPRM. Two comments were from financial industry trade associations and two were from individuals. While the comments generally were supportive of the NPRM, the trade association commenters requested that the OCC confirm the permissibility of certain lending and leasing transactions involving physical metals and expressed concern about the potential impact of the rulemaking on the liquidity of the copper market. A detailed discussion of the commenters' concerns and the OCC's response follows.

Two commenters offered general views on the proposed dealing and investing prohibition for industrial and commercial metal, including copper, under the proposed rule. One was generally supportive of the NPRM's treatment of copper cathodes as an industrial and commercial metal. This commenter noted the proposal was consistent with banks' treatment of copper, as banks currently buy and sell copper based on its value for industrial and commercial purposes rather than as a store of value. The commenter also offered additional support for the rulemaking, noting that banks that own copper are exposed to large fluctuations in copper prices, encounter potential conflicts of interest between house positions and client positions, and may be able to manipulate copper markets through large physical positions. This commenter asserted that the proposed treatment is appropriate because bank copper trading activities more closely resemble commercial enterprises rather than a banking business. The commenter pointed to the PSI Report and 620 Study to support these comments.

The second commenter expressed concern that the OCC has not demonstrated a compelling reason to change its 1995 copper interpretation. The commenter argued that the reasons the OCC approved copper activities in Interpretive Letter 693 are still valid today and that the OCC should not pursue the rulemaking in the absence of a compelling need or corresponding regulatory benefit. After carefully considering these comments, the OCC continues to believe that dealing or investing in copper cathodes, and other industrial or commercial metal, is not appropriate for national banks. As the OCC explained in the NPRM, events subsequent to Interpretive Letter 693 have confirmed copper is a base metal and thus, should be distinguished from precious metals that are not held in industrial or commercial form.12 For example, in 2000, the London Metals Exchange (“LME”) introduced a futures contract on a base metal index containing copper, aluminum, and zinc.13 In 2006, the LME followed with “mini” futures for copper, aluminum and zinc. By contrast, firms have launched exchange-traded funds (ETFs) that invest solely in gold, silver, palladium, platinum, or some combination thereof, indicating a widespread belief that these metals are a store of value. The OCC notes there are no copper ETFs. In addition, the OCC understands that national banks that trade copper treat it as a base metal and trade it alongside aluminum and zinc rather than gold and silver. Finally, the OCC considered the issues and risks identified in the PSI Report with respect to physical copper.14 The commenter's observations do not negate the information provided in the NPRM and these facts demonstrate that the OCC has adequately described its reasons for changing its 1995 interpretation.

The preamble to the NPRM explained that the OCC did not consider the proposed rule to prohibit national banks from buying or selling metal through a transitory title transfer entered into as part of a customer-driven financial intermediation business.15 The OCC explained that metal owned through a transitory title transfer typically does not entail physical possession of a commodity; the ownership occurs solely to facilitate the underlying transaction and lasts only for a moment in time. However, the OCC invited comment on whether transitory title transfers involving metals present risks that warrant treating such transactions as physical holdings.

Three commenters addressed transitory title transfers. Two commenters generally supported the OCC's proposed treatment of transitory title transfers. One of these commenters agreed with the assertion in the NPRM that there is no physical possession of the metal in transitory title transfers. This commenter noted that the risks of legal liability typically associated with physical commodity positions are not present in transitory title transfers and that these transactions more closely resemble customer-driven, cash-settled commodity derivatives than physical positions. Another commenter also supported the treatment of transitory title transfers, but suggested the final rule text should limit transitory title transfers to customer-driven financial intermediation transactions that are part of the business of banking. A third commenter disagreed that transitory title transfers are different from dealing and investing in physical metal just because the bank holds the metal for a legal instant. As discussed in detail below, the OCC continues to believe that transitory title transfers do not entail physical possession of industrial and commercial metals. The OCC also notes that relevant precedent already provides that transitory title transfers must be part of a customer-driven financial intermediation business.16 Therefore, the OCC is finalizing the rule as proposed.

In addition to addressing transitory title transfers, one of the commenters also requested that the OCC confirm that interests in unallocated metal accounts are not physical holdings under the final rule. The commenter identified various activities in which national banks are engaged that could involve an interest in an unallocated metals account. The OCC notes that these activities are fact specific, and determinations about fact-specific activities need to be evaluated on a case-by-case basis. Therefore, the OCC believes it is appropriate to address the applicability of the final rule to these activities on a case-by-case basis. National banks with questions regarding the permissibility of transactions that involve unallocated metals accounts should discuss the issue with the OCC. The OCC is willing to entertain requests for such determinations, consistent with its historical practice of providing interpretive opinions in cases where there is doubt about the permissibility of particular activities.

The NPRM explained that the OCC views national banks' lending authority to include reverse repurchase agreements that are the functional and economic equivalent of secured loans.17 Banks may use commodity reverse repurchase agreements to finance customer inventory.18 Using a standard reverse repurchase agreement for metal to provide financing for a bank customer rather than a traditional bank loan ordinarily does not indicate dealing or investing in the metal. However, the NPRM noted that the facts and circumstances of a particular transaction may warrant a different conclusion. For example, if a bank incurs commodity price risk or pledges, sells, or rehypothecates metal acquired under reverse repurchase agreements, the NPRM provided that the OCC may view the transaction to be dealing or investing in the metal. The OCC invited comment on the treatment of reverse repurchase agreements under the proposed rule.

Two commenters addressed the treatment of reverse repurchase agreements. One suggested the OCC prohibit all reverse repurchase agreements where there is commodity market or liquidity risk. This commenter wrote that a prohibition is a better approach than a facts and circumstances review in light of limited OCC resources. The other commenter asserted that OCC should confirm that these types of reverse repurchase agreements are permissible activities not affected by the rule. This commenter noted that the reuse of the collateral is a long-standing practice in asset-based financing and therefore pledging, selling, or rehypothecating metal owned under a reverse repurchase agreement should not be viewed as indicia of dealing activity.

The OCC continues to have concerns that reverse repurchase agreements that involve commodity price risk or that involve pledging, selling, or rehypothecating metal could be structured in some circumstances in a manner that constitutes dealing or investing activity. The OCC recognizes, as a commenter suggested, that banks may enter into hedges to mitigate price risk that exists at the conclusion of certain reverse repurchase agreements and may pledge collateral for the purpose of funding its customer financing activities. Structuring a transaction in these ways could, in some circumstances, reduce indicia of investing or dealing activity. However, the OCC does not believe it is appropriate to conclude that all reverse repurchase agreements that involve commodity price risk or pledging, etc. of collateral are permissible. Therefore, the OCC continues to believe that it is appropriate to evaluate reverse repurchase agreements that involve commodity price risk or pledging, etc. of collateral on a facts and circumstances basis, as appropriate. This approach will allow the OCC an opportunity to evaluate transactions in context and to consider relevant facts before reaching a determination as to whether a transaction involves dealing or investing. The OCC is therefore declining to make the changes the commenters have requested.

The proposed rule identified two incidental authorities under which acquiring and selling metal would remain permissible for national banks: first, collateral foreclosure activities designed to mitigate loan losses; 19 second, nominal physical hedges of customer-driven commodity derivatives. The OCC also explained in the preamble to the NPRM that a bank may buy and sell metal in conjunction with certain leasing authorities.20

One commenter addressed the proposed treatment of nominal hedging activities. This commenter suggested that the OCC require banks to disclose hedging amounts to the OCC. This commenter also suggested that the OCC require the hedge be designed to reduce risk in order to prevent commodity speculation. The OCC notes that it monitors bank hedging activity through its regular course of bank supervision. Additionally, banks that engage in commodity hedging activities already must do so in accordance with applicable law, including requirements that the hedge be designed to reduce risk.21 For these reasons, the OCC does not believe that the changes this commenter suggested are necessary.

Another commenter asked that the OCC modify the final rule to expressly permit certain metals-based financing activities. The commenter described several metal leasing and metal consignment transactions. As explained in the NPRM and below, banks may not buy and sell industrial or commercial metal for the purposes of dealing or investing in that metal. However, banks may continue to buy and sell industrial or commercial metal under other incidental authorities that do not involve dealing or investing. To the extent a bank proposes to engage in a metals-based transaction that presents an interpretive issue(s) under the authorities provided for in 12 U.S.C. 24(Seventh), the OCC will address permissibility on a facts and circumstances basis. The OCC may issue interpretive analysis, as appropriate.

The OCC solicited comment in the NPRM on the treatment of existing holdings of industrial and commercial metals. Specifically, the OCC asked whether five years to divest non-conforming assets, with the possibility of a five-year extension, would be an appropriate period of time. The OCC also asked whether there were compelling reasons to grandfather existing industrial and commercial metal holdings indefinitely.22

Two commenters addressed the issue of existing holdings of industrial and commercial metal. One commenter argued industrial and commercial metal held before the conformance date should be grandfathered because doing so would limit negative effects on copper markets and bank customers. This commenter also asked that the text of the rule include a minimum of five years to conform to the prohibition, arguing this would minimize the impact of the rule. Another commenter did not support allowing the banks additional time to divest their physical metals holdings.

National banks do not currently engage in significant dealing or investing activities in relation to physical industrial and commercial metal. Nor do national banks currently hold significant stores of industrial and commercial metal. Therefore, the OCC finds no compelling reason to grandfather existing activities. However, the OCC does believe that a short divestiture period would be appropriate. Given national banks' limited industrial and commercial metal activities, the OCC concludes that a full five-year divestiture period is not necessary. The OCC is therefore including a provision in the final rule that requires national banks to divest existing holdings of industrial and commercial metal acquired through dealing or investing activities as soon as practicable, but not later than one year from the effective date of the rule.23 This provision enables the OCC to grant up to four separate one-year extensions of this divestiture period if the bank has made a good faith effort to dispose of the metal and the bank's retention of the metal is not inconsistent with its safe and sound operation. The OCC notes that the approach of granting a divestiture period with the possibility of an extension is consistent with the OCC's treatment of other types of nonconforming assets.24 This divestiture provision applies only to existing holdings; national banks may not acquire additional holdings of industrial and commercial metal through dealing or investing activities during, or after, the divestiture period.

Three commenters discussed the impact of the proposed rule. Two commenters noted, very generally, that they expect the rule to increase cost for customers if finalized as proposed. One of these commenters also suggested the proposal would have a negative impact on the copper market as a whole, asserting that the costs of the rule will not be minimal. This commenter also argued there would be no regulatory benefit to this prohibition. Another commenter said the NPRM would reduce financial risk and conflicts of interests for banks while also allowing the OCC to impose limits on copper and other industrial and commercial metals.

As noted above, national banks do not currently engage in significant dealing or investing activities in relation to physical industrial and commercial metal. Because these markets tend to be highly competitive, we expect that the removal of OCC-supervised institutions as just one class of potential investors/dealers will not have a material effect on these markets. Furthermore, as explained in more detail below, national banks may continue to buy and sell industrial and commercial metal under certain incidental authorities. The OCC expects these limited permissible activities will allow banks to continue to serve customers with interests in commercial and industrial metals in capacities that do not involve dealing or investing activities.

As noted above, the National Bank Act authorizes national banks to buy and sell exchange, coin, and bullion. In this final rule, the OCC is interpreting these terms to exclude metals in a form primarily suited to industrial or commercial use.

Banking Circular 58 (BC-58) 25 sets forth general guidelines that apply to national banks' coin and bullion activities. It defines “coin” as “coins held for their metallic value which are minted by a government, or exact restrikes of such coins minted at a later date by or under the authority of the issuing government.” Contemporaneous OCC interpretive letters elaborated that “coin” referred only to media of exchange.26 BC-58 defines “bullion” as “uncoined gold or silver in bar or ingot form.” These definitions do not encompass industrial or commercial metal.

Interpretive letters published after BC-58 interpreted national banks' authority to buy coin and bullion to include other precious metals, namely platinum and palladium. Consistent with BC-58's definition of “coin,” the OCC in 1987 found that legal tender platinum coins held for their metallic value were “coin.” 27 That same letter prohibited dealing in platinum bars. However, in 1991, the OCC concluded that market developments warranted treating platinum bars as bullion.28 The OCC also found trading in platinum bars to be incidental to trading in platinum coins.29 For similar reasons, the OCC concluded palladium was coin and bullion and national banks could trade and deal in palladium as part of the business of banking.30 In support of its position, the OCC noted that the London Platinum and Palladium Market had linked platinum and palladium for market making and regulatory purposes and that most of the Market's members were banks.

However, other interpretive letters recognized that not every precious metal is coin or bullion. Jewelry, the OCC determined, is not.31

The OCC has long concluded that “exchange, coin, and bullion” does not encompass industrial or commercial metal. The OCC believes this conclusion is consistent with the National Bank Act and current market practice. For example, in the mid-19th century, when Congress passed the National Bank Act, “bullion” meant metal suitable for coining, not metal suitable for making wires.32 The contemporary understanding of “bullion” is broader—most currency is no longer made of precious metal—but the contemporary understanding does distinguish bullion from industrial or commercial metal. For example, modern bullion markets trade precious metals by the kilogram.33 By contrast, industrial and commercial metals markets trade base metals in quantities suitable for industrial or commercial use.34 In general, gold, silver, platinum, and palladium are bullion today because they:

• Trade in troy ounces or grams rather than metric tons; 35

• Trade in pure forms; 36

• Trade in a form suitable for coining;

• Trade as precious metals in the world's major organized markets, including the London bullion markets; and

• Are considered currency by the International Organization for Standardization.37

Gold, silver, platinum, and palladium in industrial or commercial form are not exchange, coin, or bullion.

Interpretive Letter 693 concluded that national banks could buy and sell copper (including industrial copper) as a part of or incidental to the business of banking. The OCC has reviewed the bases for the conclusion in Interpretive Letter 693 that buying and selling industrial copper is part of the business of banking, including developments in copper markets that followed this letter. For the following reasons, the OCC has determined that buying and selling copper—or any other metal—in industrial or commercial form for the purpose of dealing or investing in that metal is not part of the business of banking.

When the OCC issued Interpretive Letter 693 in 1995, the agency noted increasing similarity between transactions involving copper and those transactions already conducted by national banks with respect to gold, silver, platinum and palladium (precious metals). This increasing similarity informed the OCC's view at that time that buying and selling copper, including dealing and investing, was part of, or incidental to, the business of banking. However, copper markets have not increased in similarity to precious metal markets.38 Instead, as noted in detail above, copper is generally traded as a base metal.39

The OCC believes that dealing or investing in industrial or commercial metals, including base and precious metals in this form, is not the functional equivalent of dealing or investing in coin and bullion. The paradigmatic example of functional equivalence is that a lease is in economic substance a secured loan.40 But the significant differences between dealing in industrial or commercial metals and dealing in coin and bullion demonstrate that the former is not, in economic substance, the same as the latter. Most importantly, industrial and commercial metals trade in base metal markets by the ton in cathode or other industrial form, while coin and bullion trade in precious metal markets by the troy ounce or kilogram in bar or ingot form. In addition, banks' risk management systems distinguish between precious metals and base metals.

The OCC has also considered other factors identified in relevant precedent for determining whether dealing in or investing in industrial or commercial metal is part of the business of banking.41 The OCC does not believe that analysis under these factors supports a conclusion that this activity is part of the business of banking. For example, the OCC has not seen evidence that this activity strengthens a bank by benefiting its customers or its business.42 Nor is the OCC aware of any state-chartered banks dealing in or investing in industrial or commercial metal.43 Indeed, the OCC has not identified any precedent authorizing that activity for state banks. Such activity would suggest dealing or investing in commercial metals may be part of the business of banking.

As described above, under 12 U.S.C. 24(Seventh), a national bank has the power to exercise all such incidental powers as shall be necessary to carry on the business of banking. An activity is incidental to the business of banking if it is convenient or useful to an activity that is part of the business of banking.44

The OCC believes that dealing or investing in industrial or commercial metal is not incidental to the business of banking. Some customers may wish to trade industrial or commercial metal with national banks. However, because few banks buy or sell industrial or commercial metal in the ordinary course of business, it does not appear that dealing or investing in industrial or commercial metal significantly enhances national banks' ability to offer banking products and services, including those related to precious metals. Moreover, dealing or investing in industrial or commercial metal does not appear to enable national banks to use capacity acquired for banking operations or otherwise avoid economic loss or waste. Therefore, the OCC concludes national banks may not deal or invest in industrial or commercial metal under their incidental powers.

National banks do have incidental authority to buy and sell industrial or commercial metal in limited cases. Buying or selling industrial or commercial metal could be incidental to lending activities. For example, a mining company could post a copper cathode as collateral for a loan. Pursuant to the national bank's authority to acquire property in satisfaction of debt previously contracted, the bank could seize and then sell the copper to mitigate loan losses if the borrower defaulted.45 National banks also have incidental authority to buy and sell nominal amounts of industrial or commercial metal to hedge customer-driven commodity derivatives.46 The final rule does not prohibit these purchases and sales because they are not dealing or investing.47

In certain situations, national banks may buy and sell industrial and commercial metal as reverse repurchase agreements that are the functional and economic equivalent of secured loans.48 In a reverse repurchase agreement, a bank extends credit by simultaneously buying collateral from a client and agreeing to sell the collateral back to the client at a future date. The difference between the sale and purchase price is effectively the interest the client pays for the extension of credit. If the reverse repurchase agreement counterparty defaults, the bank can mitigate its losses by selling the collateral without first foreclosing on it. Financing customer inventory is a traditional bank activity; using reverse repurchase agreements rather than loans to provide the financing is merely a different way of providing financing.49 Financing customer inventory using reverse repurchase agreements in itself does not indicate dealing or investing in the metal. However, pledging, selling, or rehypothecating metal acquired under reverse repurchase agreements could suggest dealing or investing activity. So, too, could assuming commodity price risk. For example, an agreement in which the counterparty sells a metal at a certain price to the bank and then repurchases the metal at a price that depends on the metal's then-current market price could indicate dealing or investing activity: The bank is assuming the metal's price risk and, in some circumstances, could act to benefit from spot market price appreciation of the metal. On the other hand, setting the repurchase price at the sale price plus a spread based on the time value of money is equivalent to a secured loan. The determination of whether a reverse repurchase agreement that varies from this secured loan structure is dealing or investing is highly dependent upon the facts of each transaction. National banks with questions regarding the permissibility of reverse repurchase agreements that involve characteristics identified in this discussion should discuss the issue with the OCC. The OCC is willing to entertain requests for such determinations, consistent with its historical practice of providing interpretive opinions in cases where there is doubt about the permissibility of particular activities.

The final rule does not prohibit national banks from buying and selling metal through transitory title transfers entered into as part of a customer-driven financial intermediation business.50 Interpretive Letter 1073 51 provides that national banks may hedge metal derivative transactions on a portfolio basis with over-the-counter derivative transactions that settle in cash or transitory title transfer. Interpretive Letter 1073 also provides that a national bank may engage in transitory title transfers in metals for the accommodation of customers. The OCC concluded in Interpretive Letter 1073 that transitory title transfers involving metals do not entail the physical possession of commodities.52 The OCC's analysis in this letter noted that transitory title transfers do not involve the customary activities relating to, or risks attendant to, commodity ownership, such as storage costs, insurance, and environmental protection. For these reasons, OCC believes that transitory title transfers do not constitute physical possession of commodities and therefore does not consider transitory title transfers to be dealing or investing in industrial or commercial metal for purposes of the final rule.53 The OCC recognizes that banks may have questions about the permissibility of specific transitory title transfer transactions. The fact-specific nature of these issues merits a case-by-case review to determine the permissibility of the transaction. The OCC will continue to review requests for interpretive opinions on the permissibility of individual transactions proposed by a bank. Should the OCC become aware of additional risks that suggest transitory title transfer activity presents risks more closely akin to the risks of physical metal holdings, the OCC may reconsider the treatment of transitory title transfer transactions.

The final rule prohibits banks from dealing or investing in industrial or commercial metal. However, in response to a request from a commenter, the final rule provides a divestiture period for banks that acquired industrial or commercial metal through dealing or investing in that metal before the effective date of the rule.54 Under the divestiture provision, banks must dispose of such metal as soon as practicable, but not later than one year from the effective date of the regulation. The OCC may grant up to four separate one-year extensions of this divestiture period for a national bank that makes a good faith effort to dispose of the metal and the bank's retention of the metal is not inconsistent with its safe and sound operation. The divestiture provision applies only to existing holdings; national banks may not acquire additional holdings of industrial and commercial metal through dealing or investing activities during, or after, the divestiture period.

This divestiture period is generally consistent with the OCC's approach to other nonconforming assets. Banks with questions about the permissibility of activities or holdings involving industrial or commercial metal should ask the OCC for a review of the specific holding or activity.

Under the Paperwork Reduction Act, 44 U.S.C. 3501-3520, the OCC may not conduct or sponsor, and a person is not required to respond to, an information collection unless the information collection displays a valid Office of Management and Budget (OMB) control number. This final rule does not introduce any new collections of information, therefore, it does not require a submission to OMB.

The Regulatory Flexibility Act, 5 U.S.C. 601 et seq., (RFA), requires an agency, in connection with a final rule, to prepare a Final Regulatory Flexibility Analysis describing the impact of the rule on small entities (defined by the Small Business Administration (SBA) for purposes of the RFA to include banking entities with total assets of $550 million or less) or to certify that the rule will not have a significant economic impact on a substantial number of small entities.

As of December 31, 2015, the OCC supervised 1,032 small entities.55 Although the rule applies to all OCC-supervised small entities, and thus affects a substantial number of small entities, no small entities supervised by the OCC currently buy or sell metal in a physical form primarily suited to commercial or industrial use for the purpose of dealing or investing in that metal. Thus, the rule will not have a substantial impact on any OCC-supervised small entities.

Therefore, the OCC certifies that the final rule will not have a significant economic impact on a substantial number of OCC-supervised small entities.

The OCC analyzed the final rule under the factors set forth in the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1532). Under this analysis, the OCC considered whether the rule includes a federal mandate that may result in the expenditure by state, local, and Tribal governments, in the aggregate, or by the private sector, of $100 million or more in any one year (adjusted annually for inflation).

Although the final rule would apply to all OCC-supervised institutions, very few of these institutions are currently involved in activities involving dealing or investing in copper or other metals in a physical form primarily suited to commercial or industrial use.

While the final rule may prevent OCC-supervised institutions from realizing potential gains from prohibited investments in physical metals, the rule also may protect them from realizing potential losses from investments in physical metals. The OCC is not able to estimate these potential gains or losses because they will depend on future fluctuations in the prices of the various physical metals. However, the OCC does expect OCC-supervised institutions to be able to achieve comparable returns in alternative non-prohibited investment opportunities. Thus, the OCC estimates that the opportunity cost of the final rule will be near zero.

The final rule may impose one-time costs on affected institutions with respect to the disposal of current physical metal inventory that a bank may not deal in or invest in under the rule. This cost will depend to some extent on the amount of physical metal inventory that affected institutions must dispose of. Given the divestiture period in the final rule, a gradual sell-off should not affect market prices and the affected institutions would receive fair value for their metals. Under these circumstances, the OCC estimates that the disposal costs will also be minimal.

Finally, by establishing that buying and selling physical metal in commercial or industrial form is generally not part of the business of banking, the rule implies that customers of OCC-supervised institutions will have to identify another reliable source of supply of physical metals and that OCC-supervised institutions will be less able to compete with non-bank metals dealers. Given how technology has made the physical metals markets more accessible, the OCC expects bank customers will face minimal costs associated with identifying another supplier of physical metals. The OCC also expects that losing the ability to compete with non-bank metal dealers will not significantly detract from the strength of OCC-supervised institutions, especially given that the final rule would recognize several business-of-banking incidental exceptions to the prohibition on buying and selling physical metal. These permissible activities should enable OCC-supervised institutions to continue to provide metals related services to bank customers that do not involve dealing or investing in commercial and industrial metals.

For the reasons described above, the OCC has determined that the final rule would not result in expenditures by state, local, and Tribal governments, or by the private sector, of $100 million or more. Accordingly, the OCC has not prepared a written statement to accompany the final rule.

For the reasons set forth in the preamble, OCC amends 12 CFR part 7 as follows:

Airworthiness Directive 2016-25-02 (81 FR 90955, December 16, 2016), requires installing markers to limit the hydraulic system fluid used to a specific brand, doing hydraulic fluid tests of the hydraulic systems, replacing hydraulic system fluid if necessary, and doing all applicable related investigative and corrective actions for certain The Boeing Company Model 787-8 airplanes.

As published, the amendment number specified in the preamble and regulatory text is incorrect. The incorrectly specified number was Amendment 39-18725; the correct number is Amendment 39-18728.

We have reviewed Boeing Alert Service Bulletin B787-81205-SB270026-00, Issue 002, dated June 13, 2016. This service information describes procedures for installing markers to limit the hydraulic system fluid used to a specific brand, doing hydraulic fluid tests of the hydraulic systems, replacing the hydraulic system fluid if necessary, and related investigative and corrective actions. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section.

This document corrects an error and correctly adds the AD as an amendment to 14 CFR 39.13. Although no other part of the preamble or regulatory information has been corrected, we are publishing the entire rule in the Federal Register.

The effective date of this AD remains January 20, 2017.

Since this action only corrects an amendment number, it has no adverse economic impact and imposes no additional burden on any person. Therefore, we have determined that notice and public procedures are unnecessary.

Accordingly, pursuant to the authority delegated to me by the Administrator, the Federal Aviation Administration amends part 39 of the Federal Aviation Regulations (14 CFR part 39) as follows:

Discussion

We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 to supersede AD 2016-04-12, Amendment 39-18406 (81 FR 12583, March 10, 2016), (“AD 2016-04-12”). AD 2016-04-12 applied to the specified products. The NPRM published in the Federal Register on June 17, 2016 (81 FR 39601). The NPRM proposed to require initial and repetitive spectrometric oil analysis (SOA) of the AGB, and wear inspections of the engine AGB cover. However, this AD only mandates wear inspections of the engine AGB cover and does not add requirements beyond the scope of the NPRM.

We gave the public the opportunity to participate in developing this AD. We received no comments on the NPRM (81 FR 39601, June 17, 2016).

Since we issued AD 2016-04-12, the European Aviation Safety Agency (EASA) has issued MCAI European Aviation Safety Agency AD 2016-0055R1, dated October 11, 2016, to only specify that periodic wear inspections of the engine AGB cover are necessary. This AD removes the proposed requirements for initial and repetitive SOA of the AGB, which reduces the costs of compliance in this AD.

Also since we issued AD 2016-04-12, Safran Helicopter Engines, S.A. has issued Mandatory Service Bulletin (MSB) No. 292 72 2861, Version D, dated September 23, 2016. The MSB only requires performing periodic wear inspections of the engine AGB cover.

We reviewed the available data and determined that air safety and the public interest require adopting this AD with the changes described previously. We determined that these changes will not increase the economic burden on any operator or increase the scope of this AD.

Safran Helicopter Engines, S.A. has issued MSB No. 292 72 2861, Version D, dated September 23, 2016. The MSB describes procedures for performing periodic wear inspections of the engine AGB cover. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section.

We estimate that this AD affects 250 engines installed on helicopters of U.S. registry. We also estimate that it will take 1 hour to perform the engine AGB cover wear inspection. The average labor rate is $85 per hour. Required parts for the wear inspection cost about $3,100 per engine. We estimate that 5 engines will require AGB replacement at a cost of $44,397 per engine. We also estimate that it will take about 2 hours to replace the engine AGB. Based on these figures, we estimate the cost of this AD on U.S. operators to be $1,019,085.

Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, Section 106, describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the Agency's authority.

We are issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701, “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

This AD will not have federalism implications under Executive Order 13132. This AD will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify that this AD:

(1) Is not a “significant regulatory action” under Executive Order 12866,

(2) Is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979),

(3) Will not affect intrastate aviation in Alaska to the extent that it justifies making a regulatory distinction, and

(4) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

Accordingly, under the authority delegated to me by the Administrator, the FAA amends part 39 of the Federal Aviation Regulations (14 CFR part 39) as follows:

I. Background

In the Federal Register of December 1, 2014 (79 FR 71156), we published a final rule requiring disclosure of certain nutrition information for standard menu items in certain restaurants and retail food establishments. The final rule, which is now codified at § 101.11 (21 CFR 101.11), implements provisions of section 403(q)(5)(H) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 343(q)(5)(H)) and:

• Defines terms, including terms that describe criteria for determining whether an establishment is subject to the rule;

• establishes which foods are subject to the nutrition labeling requirements and which foods are not subject to these requirements;

• requires that calories for standard menu items be declared on menus and menu boards that list such foods for sale;

• requires that calories for standard menu items that are self-service or on display be declared on signs adjacent to such foods;

• requires that written nutrition information for standard menu items be available to consumers who ask to see it;

• requires, on menus and menu boards, a succinct statement concerning suggested daily caloric intake (succinct statement), designed to help the public understand the significance of the calorie declarations;

• requires, on menus and menu boards, a statement regarding the availability of the written nutrition information (statement of availability);

• establishes requirements for determination of nutrient content of standard menu items;

• establishes requirements for substantiation of nutrient content determined for standard menu items, including requirements for records that a covered establishment must make available to FDA within a reasonable period of time upon request; and

• establishes terms and conditions under which restaurants and similar retail food establishments not otherwise subject to the rule could elect to be subject to the requirements by registering with FDA.

In the preamble to the final rule (79 FR 71156 at 71239 through 71241), we stated that the rule would be effective on December 1, 2015, and also provided a compliance date of December 1, 2015, for covered establishments. The final rule (at § 101.11(a)) defines “covered establishment” as a restaurant or similar retail food establishment that is a part of a chain with 20 or more locations doing business under the same name (regardless of the type of ownership, e.g., individual franchises) and offering for sale substantially the same menu items, as well as a restaurant or similar retail food establishment that is voluntarily registered to be covered under § 101.11(d).

In the Federal Register of July 10, 2015 (80 FR 39675), in response to requests from affected entities, we announced our decision to extend the compliance date for the final rule to December 1, 2016. The final rule requirements are intended to ensure that consumers are provided accurate, clear, and consistent nutrition information for foods sold in covered establishments in a direct and accessible manner to enable consumers to make informed and healthful dietary choices. We stated in that extension that allowing adequate time for covered establishments to fully implement the final rule's requirements, as described in the requests, would help accomplish the primary objective of the final rule and is in the public interest.

On December 18, 2015, the President signed the Consolidated Appropriations Act, 2016 (Pub. L. 114-113). Section 747 of the Consolidated Appropriations Act states that none of the funds made available under the Consolidated Appropriations Act may be used to implement, administer, or enforce the final rule entitled “Food Labeling; Nutrition Labeling of Standard Menu Items in Restaurants and Similar Retail Food Establishments” until 1 year after the date we publish a Level 1 guidance with respect to nutrition labeling of standard menu items in restaurants and similar retail food establishments.

In the Federal Register of May 5, 2016 (81 FR 27067), we announced the availability of the Level 1 guidance document and stated that enforcement of the final rule published December 1, 2014, would commence on May 5, 2017 (81 FR 27067 at 27068). While FDA made clear that we would not begin enforcing menu labeling requirements prior to May 5, 2017, we did not at that time formally make a change to the compliance date through rulemaking.

Therefore, through this final rule, we are clarifying and confirming that the compliance date for the final rule entitled “Food Labeling; Nutrition Labeling of Standard Menu Items in Restaurants and Similar Retail Food Establishments,” codified at § 101.11, is May 5, 2017.

We have examined the impacts of the final rule under Executive Order 12866, Executive Order 13563, the Regulatory Flexibility Act (5 U.S.C. 601-612), and the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4). Executive Orders 12866 and 13563 direct us to assess all costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity). We have developed a comprehensive Economic Analysis of Impacts that assesses the impacts of the final rule. We believe that this final rule is not a significant regulatory action as defined by Executive Order 12866.

The Regulatory Flexibility Act requires Agencies to analyze regulatory options that would minimize any significant impact of a rule on small entities. Because this rule provides more flexibility by further extending the compliance date for the “Food Labeling: Nutrition Labeling of Standard Menu Items in Restaurants and Similar Retail Food Establishments” final rule (79 FR 71156) (menu labeling final rule), we certify that the final rule will not have a significant economic impact on a substantial number of small entities.

The Unfunded Mandates Reform Act of 1995 (section 202(a)) requires us to prepare a written statement, which includes an assessment of anticipated costs and benefits, before issuing “any rule that includes any Federal mandate that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100,000,000 or more (adjusted annually for inflation) in any one year.” The current threshold after adjustment for inflation is $146 million, using the most current (2015) Implicit Price Deflator for the Gross Domestic Product. This final rule would not result in an expenditure in any year that meets or exceeds this amount.

This rule extends the compliance date of the menu labeling final rule by approximately 5 months: From December 1, 2016, to May 5, 2017. The estimated costs and benefits accrued in any given year that the menu labeling rule is in effect, relative to the first year of compliance, does not change; however, because the compliance date is being extended by 5 months, the discounted value of both total costs and total benefits decreases. The principal benefit of this final rule will be the reduction in costs associated with extending the compliance date by 5 months. The principal cost of this final rule will be the reduction in benefits associated with extending the compliance date by 5 months. Extending the compliance date of the menu labeling final rule by 5 months reduces the annualized net benefits (discounted at 3 percent) approximately 3 percent, from $457 million to $442 million. While average annualized net benefits decrease by $15 million, they are still positive. We note that this extension of the compliance date will not have an actual effect on the cost or benefits of the menu labeling rule, because, under section 747 of the Consolidated Appropriations Act, 2016, FDA was not authorized to spend funds to “implement, administer, or enforce” the rule until May 5, 2017, a year after the date on which published a Level 1 guidance with respect to nutrition labeling of standard menu items in restaurants and similar retail food establishments. We are presenting the benefits and costs of the menu labeling final rule, which takes effect according to the dates in this rule.

The full analysis of economic impacts is available in the docket for this final rule (Ref. 1) and at http://www.fda.gov/AboutFDA/ReportsManualsForms/Reports/EconomicAnalyses/default.htm.

This final rule contains no collection of information. Therefore, clearance by the Office of Management and Budget under the Paperwork Reduction Act of 1995 is not required.

We have determined under 21 CFR 25.30(k) that this action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required.

The following reference is on display in the Division of Dockets Management (HFA-305), Food and Drug Administration, 5630 Fishers Lane, Rm. 1061, Rockville, MD 20852, and is available for viewing by interested persons between 9 a.m. and 4 p.m., Monday through Friday; it is also available electronically at https://www.regulations.gov. FDA has verified the Web site addresses, as of the date this document publishes in the Federal Register, but Web sites are subject to change over time.

I. Background—Regulatory Authorities

The Federal Food, Drug, and Cosmetic Act (the FD&C Act), as amended by the Medical Device Amendments of 1976 (the 1976 amendments) (Pub. L. 94-295), the Safe Medical Devices Act of 1990 (Pub. L. 101-629), the Food and Drug Administration Modernization Act of 1997 (Pub. L. 105-115), the Medical Device User Fee and Modernization Act of 2002 (Pub. L. 107-250), the Medical Devices Technical Corrections Act (Pub. L. 108-214), the Food and Drug Administration Amendments Act of 2007 (Pub. L. 110-85), and the Food and Drug Administration Safety and Innovation Act (FDASIA) (Pub. L. 112-144), among other amendments, established a comprehensive system for the regulation of medical devices intended for human use. Section 513 of the FD&C Act (21 U.S.C. 360c) established three categories (classes) of devices, reflecting the regulatory controls needed to provide reasonable assurance of their safety and effectiveness. The three categories of devices are class I (general controls), class II (special controls), and class III (premarket approval).

Under section 513(d) of the FD&C Act, devices that were in commercial distribution before the enactment of the 1976 amendments, May 28, 1976 (generally referred to as preamendments devices), are classified after FDA has: (1) Received a recommendation from a device classification panel (an FDA advisory committee); (2) published the panel's recommendation for comment, along with a proposed regulation classifying the device; and (3) published a final regulation classifying the device. FDA has classified most preamendments devices under these procedures.

Devices that were not in commercial distribution prior to May 28, 1976 (generally referred to as “postamendments devices”) are automatically classified by section 513(f) of the FD&C Act into class III without any FDA rulemaking process. Those devices remain in class III and require premarket approval unless, and until, the device is reclassified into class I or II or FDA issues an order finding the device to be substantially equivalent, in accordance with section 513(i) of the FD&C Act, to a predicate device that does not require premarket approval. The Agency determines whether new devices are substantially equivalent to predicate devices by means of premarket notification procedures in section 510(k) of the FD&C Act (21 U.S.C. 360(k)) and part 807 (21 Code of Federal Regulations (CFR) part 807).

A preamendments device that has been classified into class III and devices found substantially equivalent by means of premarket notification (510(k)) procedures to such a preamendments device or to a device within that type (both the preamendments and substantially equivalent devices are referred to as preamendments class III devices) may be marketed without submission of a premarket approval application (PMA) until FDA issues a final order under section 515(b) of the FD&C Act (21 U.S.C. 360e(b)) requiring premarket approval.

Under section 515(i)(2) of the FD&C Act, FDA has the authority to issue an administrative order revising the proposed classification of a device for which FDA has classified as a class III device and for which no administrative order has been issued calling for PMAs under section 515(b) of the FD&C Act, so that the device is classified into class I or class II, after issuance of a proposed order, a meeting of a device classification panel, and consideration of the comments of a proposed order. In determining whether to revise the proposed classification of a device or to require a device to remain in class III, FDA applies the criteria set forth in section 513(a) of the FD&C Act. Section 513(a)(1)(B) of the FD&C Act defines class II devices as those devices for which the general controls in section 513(a)(1)(A) by themselves are insufficient to provide reasonable assurance of safety and effectiveness, but for which there is sufficient information to establish special controls to provide a reasonable assurance of safety and effectiveness of a device.

On July 9, 2012, FDASIA was enacted. Section 608(a) of FDASIA amended section 513(e) of the FD&C Act, changing the mechanism for reclassifying a device from rulemaking to an administrative order.

Section 513(e) of the FD&C Act provides that FDA may, by administrative order, reclassify a device based upon “new information.” FDA can initiate a reclassification under section 513(e) or an interested person may petition FDA to reclassify a preamendments device. The term “new information,” as used in section 513(e), includes information developed as a result of a reevaluation of the data before the Agency when the device was originally classified, as well as information not presented, not available, or not developed at that time. (See, e.g., Holland-Rantos Co. v. United States Department of Health, Education, and Welfare, 587 F.2d 1173, 1174 n.1 (D.C. Cir. 1978); Upjohn v. Finch, 422 F.2d 944 (6th Cir. 1970); Bell v. Goddard, 366 F.2d 177 (7th Cir. 1966).)

Reevaluation of the data previously before the Agency is an appropriate basis for subsequent action where the reevaluation is made in light of newly available authority (see Bell, 366 F.2d at 181; Ethicon, Inc. v. FDA, 762 F.Supp. 382, 388-391 (D.D.C. 1991)), or in light of changes in “medical science” (Upjohn, 422 F.2d at 951). Whether data before the Agency are old or new data, the “new information” to support reclassification under section 513(e) must be “valid scientific evidence,” as defined in section 513(a)(3) of the FD&C Act and 21 CFR 860.7(c)(2). (See, e.g., General Medical Co. v. FDA, 770 F.2d 214 (D.C. Cir. 1985); Contact Lens Mfrs. Ass'n v. FDA, 766 F.2d 592 (D.C. Cir. 1985), cert. denied, 474 U.S. 1062 (1986).)

FDA relies upon “valid scientific evidence” in the classification process to determine the level of regulation for devices. To be considered in the reclassification process, the “valid scientific evidence” upon which the Agency relies must be publicly available. Publicly available information excludes trade secret and/or confidential commercial information, e.g., the contents of a pending PMA. (See section 520(c) of the FD&C Act (21 U.S.C. 360j(c)).)

Section 513(e)(1) of the FD&C Act sets forth the process for issuing a final reclassification order. Specifically, prior to the issuance of a final order reclassifying a device, the following must occur: (1) Publication of a proposed order in the Federal Register; (2) a meeting of a device classification panel described in section 513(b) of the FD&C Act; and (3) consideration of comments to a public docket.

FDA published a proposed order to propose different classifications for rigid pedicle screw systems and semi-rigid systems (SRSs) in the Federal Register of November 12, 2014 (79 FR 67105) (2014 Proposed Order). Moreover, as explained in section II of the 2014 Proposed Order, on May 22, 2013, FDA held a classification meeting of the Orthopedic and Rehabilitation Devices Panel (the 2013 Panel) to discuss pedicle screw systems, which include rigid pedicle screw systems and SRSs. FDA received and has considered all the comments on the 2014 Proposed Order, as discussed in section III. Therefore, FDA has met the requirements under sections 513(e)(1) and 515(i)(2) of the FD&C Act.

Pedicle screw systems consist of multiple component devices made from a variety of materials that allow the surgeon to build an implant system to fit the patient's anatomical and physiological requirements. Such a spinal implant assembly may consist of a combination of hooks, screws, longitudinal members (e.g., plates, rods, plate/rod combinations), transverse or cross connectors, and interconnection mechanisms (e.g., rod-to-rod connectors, offset connectors). Rigid pedicle screw systems provide immediate rigid fixation to the spinal column as an adjunct to spinal fusion procedures.

Since the 1998 classification (63 FR 40025, July 27, 1998), changes in technological characteristics have occurred, leading to the emergence of a new type of pedicle screw system, SRSs, previously referred to as dynamic stabilization systems (DSSs). SRSs are a subset of the pedicle screw systems regulated under § 888.3070 (21 CFR 888.3070). SRSs are defined as systems that contain one or more non-uniform and/or non-metallic longitudinal elements (e.g., polymer cords, moveable screw heads, springs) that allow more motion or flexibility (e.g., bending, rotation, translation) compared to rigid systems and do not provide immediate rigid fixation to the spinal column as an adjunct to spinal fusion procedures.

In the 2014 Proposed Order, FDA proposed to modify the identification language from the way it is presently written in § 888.3070(a) and sought comments on the means of providing distinction between rigid pedicle screw systems and pedicle screw systems that allow more motion or flexibility. As discussed in section III, FDA received several comments suggesting that § 888.3070 separate SRSs, which may allow for more flexibility than traditional rigid pedicle screw systems but still facilitate fusion, from truly “dynamic” systems that are intended for non-fusion use. Truly dynamic systems intended for non-fusion use are postamendments devices that are outside the scope of this regulatory action. FDA agrees with these comments and has modified the identification language from the way it is presently written in § 888.3070(a) to include SRSs.

FDA has also, on its own initiative, renamed “pedicle screw spinal system” as “thoracolumbosacral pedicle screw system” to clearly distinguish these devices from posterior cervical screw systems, which are not intended to be covered by § 888.3070.

In response to the 2014 Proposed Order, FDA received 15 comments from industry, trade organizations, professional societies, and individuals. Certain comments are grouped together under a single number because the subject matter of the comments is similar. The number assigned to each comment is purely for organizational purposes and does not signify the comment's value or importance or the order in which it was submitted. The comments that follow are grouped into those that pertain to rigid pedicle screw systems and those that pertain to SRSs.

Of the 15 comments received, several specifically referenced the proposal to reclassify rigid pedicle screw systems when intended to provide immobilization and stabilization of spinal segments in the thoracic, lumbar, and sacral spine as an adjunct to fusion in the treatment of degenerative disc disease (DDD) and spondylolisthesis (other than either severe spondylolisthesis (grades 3 and 4) at L5-S1 or degenerative spondylolisthesis with objective evidence of neurologic impairment). Some commenters agreed with the recommendation to reclassify these as class II devices (special controls), most of whom specifically stated that they agreed with the Agency that general and special controls can provide reasonable assurance of the safety and effectiveness of rigid pedicle screw systems.

(Comment 1) Some commenters did not agree with the proposal to reclassify rigid pedicle screw systems to class II (special controls). One comment stated that labeling special controls are not appropriate risk mitigations and that clinical data should be required for these devices. Another comment noted that adverse events have been identified for rigid pedicle screw systems, and the final comment noted varied results in clinical literature, specifically citing a 1990 study by Matsuzaki et al. that found a 5.7 percent screw breakage rate (Ref. 1).

(Response 1) FDA disagrees that rigid pedicle screw systems for treatment of DDD and spondylolisthesis (other than either severe spondylolisthesis (grades 3 and 4) at L5-S1 or degenerative spondylolisthesis with objective evidence of neurologic impairment) should remain in class III. The Agency believes the labeling special controls proposed to inform users of the technological features of the device (including identification of device materials and the principles of device operation), intended use and indications for use (including levels of fixation), identification of magnetic resonance compatibility status, cleaning and sterilization instructions, and detailed instructions of each surgical step (including device removal) are appropriate to help mitigate the identified risks to health that may result from improper use of rigid pedicle screw systems. The Agency does not believe clinical data are necessary for rigid pedicle screw systems indicated for treatment of DDD and spondylolisthesis (other than either severe spondylolisthesis (grades 3 and 4) at L5-S1 or degenerative spondylolisthesis with objective evidence of neurologic impairment). Clinical data from use of rigid pedicle screw systems for these indications were presented to the 2013 Panel to support reclassification to class II. Furthermore, non-clinical methods used to evaluate these devices have been demonstrated to adequately mitigate risks to health. FDA still retains the ability to request appropriate performance testing, including clinical data for individual devices with a different indication for use and/or different technological features that do not raise different questions of safety and effectiveness as compared to a predicate device, to demonstrate that the individual devices are as safe and effective as the predicate device, if necessary. FDA acknowledges that rigid pedicle screw systems, like all medical devices, have risks to health, as evidenced by the adverse events noted by one commenter, and the breakage rate identified in the 1990 Matsuzaki et al. study cited by another commenter (Ref. 1). On May 22, 2013, FDA held the 2013 Panel meeting to discuss the current classification of rigid pedicle screw systems for treatment of degenerative disc disease and spondylolisthesis other than either severe spondylolisthesis (grades 3 and 4) at L5-S1 or degenerative spondylolisthesis with objective evidence of neurologic impairment, which are currently class III indications (Ref. 2). FDA is not aware of evidence that indicates there is a higher rate of screw fracture for the class III indications, which is the focus of this reclassification effort, compared to the class II indications. The 2013 Panel discussed the adverse events and clinical literature associated with rigid pedicle screw systems for all indications, and recommended that traditional, rigid pedicle screw systems as an adjunct to fusion for the treatment of DDD and spondylolisthesis other than severe grades 3 or 4, or degenerative spondylolisthesis with objective evidence of neurologic impairment be reclassified as class II (special controls).

FDA agrees with the 2013 Panel's recommendation for reclassification. The Agency believes, as stated in the 2014 Proposed Order, that the risks of rigid pedicle screw systems as an adjunct to fusion for the treatment of DDD and spondylolisthesis other than severe grades 3 or 4, or degenerative spondylolisthesis with objective evidence of neurologic impairment, are sufficiently understood based on valid scientific evidence, which enables FDA to establish special controls to provide reasonable assurance of safety and effectiveness of rigid pedicle screw systems.

(Comment 2) One commenter provided an additional recommendation for the identification language for rigid pedicle screw systems. Specifically, to more completely characterize components that may be used as a part of these systems, the commenter suggested adding sublaminar wires and cables to the list of components of these systems.

(Response 2) FDA disagrees with this proposed edit to the identification language. These additional components, while often used in conjunction with pedicle screw systems, are classified under a separate classification regulation and, therefore, are not appropriate to include under § 888.3070. However, in review of this information, FDA acknowledges that hooks (currently listed in the identification language for pedicle screw systems) are also classified under a separate classification regulation. Therefore, the Agency has also taken the opportunity to remove “hooks” from the revised identification language for rigid pedicle screw systems.

(Comment 3) One commenter recommended removing design characteristics as a special control because this should be a requirement of all premarket notifications. This commenter also recommended removing the word “rigid” from the identification.

(Response 3) FDA disagrees with the recommendation of this commenter to remove design characteristics as a special control. FDA considers this special control critical to help differentiate technological features for rigid pedicle screw systems from SRSs. Similarly, inclusion of the word “rigid” in the identification language is necessary to distinguish between these and SRSs.

(Comment 4) One commenter recommended revising the biocompatibility special control to state “compliance with biocompatibility standards.”

(Response 4) FDA disagrees with this comment and has determined that it is most appropriate not to reference consensus standards within special controls because relevant standards are subject to change over time. The special controls as worded allow for additional mechanisms by which manufacturers can meet the requirements to ensure conformity.

(Comment 5) One commenter recommended removing “wear” from the list of potential means by which a device could fail.

(Response 5) The risk of wear was raised at the 2013 Panel, specifically in the context of SRSs. FDA still considers there to be a potential for wear in traditional rigid systems as well and, therefore, has elected not to modify the definition of device failure accordingly.

(Comment 6) One commenter suggested editorial revisions to the risks and descriptive text associated with risks as outlined in the 2014 Proposed Order.

(Response 6) These edits were not considered to substantively change the intended meaning of the risks and associated mitigations and, therefore, FDA will not accept these suggested edits in this final order.

(Comment 7) One commenter provided several proposed edits that would impact § 888.3070(b)(1). Additionally, this commenter provided other editorial recommendations to the language from the 2014 Proposed Order.

(Response 7) While FDA agrees with the proposed modifications that would impact § 888.3070(b)(1), these will require a separate regulatory action because this section of the regulation is outside the scope of the call for information under section 515(i) of the FD&C Act. Edits that were proposed to the language from the 2014 Proposed Order did not materially impact the language within this final order.

In reviewing the 2014 Proposed Order, the comments received, and the 2013 Panel's recommendations, FDA is also making minor modifications to the identification for thoracolumbosacral pedicle screw systems. The identification for rigid pedicle screw systems will be revised from “longitudinal members (e.g., plates, rods, plate/rod combinations)” to “longitudinal members (e.g., plates, rods including dual diameter rods, plate/rod combinations)” as the latter statement clarifies that dual diameter rods would be considered to be part of rigid systems rather than as “non-uniform longitudinal elements” specified under the definition of SRSs.

In the 2014 Proposed Order, FDA solicited comments to revise the identification language for pedicle screw spinal systems to distinguish between rigid pedicle screw systems and DSSs (now termed SRSs).

(Comment 8) While most commenters did not specifically comment on the proposed up-classification of SRSs to class III, approximately half of the comments suggested revisions to the definition of SRSs. These suggestions propose separating SRSs, which may allow for more flexibility than traditional rigid pedicle screw systems but still facilitate fusion, from truly “dynamic” systems that are intended for non-fusion use. Truly dynamic systems are postamendments devices that are outside the scope of this regulatory action.

(Response 8) FDA agrees with these comments and will henceforth refer to these systems as SRSs in this final order under § 880.3070(b)(3).

(Comment 9) Several commenters provided alternative identification language to FDA's initially proposed definition of DSSs, now termed SRSs, which was as follows: “Dynamic stabilization systems are defined as systems that contain one or more non-uniform and/or non-metallic longitudinal elements (e.g., polymer cords, moveable screw heads, springs) that allow more motion or flexibility (e.g., bending, rotation, translation) compared to rigid pedicle screw systems and do not provide immediate rigid fixation to the spinal column as an adjunct [to] fusion.” While most commenters agreed with the language that these systems “allow more motion or flexibility,” there were several comments that disagreed with the technological features called out within this definition (i.e., non-uniform and/or non-metallic). For example, one commenter provided the case that an undersized metallic rod may allow for more flexibility than a larger non-metallic rod. Similar arguments were also made at the 2013 Panel, where the challenges of defining these systems based upon technological characteristics were also discussed. Accordingly, several commenters proposed modifications to the identification language of these systems based solely on intended use (i.e., not intended for immediate rigid fixation, or intended to allow more motion or flexibility compared to rigid systems). Two commenters did not specifically provide alternate language; however, these commenters provided data from clinical and non-clinical studies to support the argument that rods manufactured from polyetheretherketone (PEEK) perform similarly to traditional metallic rods (Refs. 3 to 5). Qi et al. demonstrated that subjects undergoing single posterolateral fusion with either titanium rods or PEEK rods showed no difference in adjacent segment disease, spinal alignment, or clinical outcomes (Ref. 3). A biomechanical study by Sengupta et al. shows similar restriction in range of motion for PEEK rods compared to both the traditional metallic rods and another SRS device (Ref. 4). Kurtz et al. collected and analyzed explanted PEEK and traditional metallic rods and concluded that the PEEK rod retrievals showed similar wear patterns compared to traditional rigid rods (Ref. 5). These commenters also used terminology to distinguish these types of systems (i.e., “semi-rigid systems”), which are used as an adjunct to fusion, from “non-rigid” or “flexible” systems, which are “intended for dynamic stabilization” of the spine. An additional commenter also cited a cadaver study, which similarly showed that PEEK rods resulted in comparable stability to traditional metallic systems (Ref. 6).

(Response 9) In response to these comments, FDA has revised this identification to remove reference to “non-metallic” components and has also captured devices with less stiff materials (i.e., “features that allow more motion or flexibility compared to rigid systems”). FDA has also elected to alter the terminology used to identify these systems that “allow more motion or flexibility” when used as an adjunct to fusion as SRSs. This is also consistent with comments made at the 2013 Panel, in which the distinction between “semi-rigid” and “dynamic” systems was discussed. The features that may result in a device being classified as an SRS may include, but are not limited to, polymer cords, moveable screw heads, or springs. “Dynamic stabilization systems” for use in non-fusion procedures remain a postamendments class III device requiring PMAs.

In the 2014 Proposed Order, which was issued pursuant to sections 513(e)(1) and 515(i)(2) of the FD&C Act, FDA initially recommended that SRSs be classified into class III and require PMAs. Some commenters agreed with FDA's class III recommendation and other commenters proposed that SRSs be classified into class II.

(Comment 10) One comment agreed that SRSs for non-fusion uses should remain in class III, but SRSs used as an adjunct to fusion should be classified as class II. The commenter described that “[w]e believe that this matter arose after two [SRS] products from two different manufacturers were recalled in 2008 and 2009. These two recalled devices created FDA concern over the entire category of [SRS], calling into question whether preclinical testing alone is sufficient to predict clinical outcomes for these devices. Other SRSs have not been recalled, nor are there significant safety concerns with these other [SRSs].” Another commenter conducted a Medical Device Reporting (MDR) analysis, which separated out PEEK rods from other SRSs to demonstrate a similarity in reporting of adverse events associated with PEEK rods to that of traditional metallic rods.

Commenters specifically recommend that PEEK, or carbon-fiber reinforced PEEK, should remain in class II. This is based on several reported studies that demonstrate similarities in safety profiles and effectiveness outcomes for these devices as compared to devices incorporating traditional metallic rods, as also described previously in Comment 9 (Refs. 3 to 5). Two non-clinical literature articles provided in response to the proposed order demonstrate similar behavior between systems with PEEK rods and those with titanium rods.

Commenters also provided references to clinical studies using SRSs (Refs. 7 to 9). Each of these studies demonstrates fusion rates within a range deemed to be clinically acceptable in single- or multilevel posterolateral fusion using PEEK rod constructs.

(Response 10) Based on these comments to the proposed order and to corroborate findings from the literature following the 2013 Panel meeting, FDA conducted an additional MDR analysis of SRSs excluding the two recalled systems, as well as an MDR analysis of PEEK rods alone.

A search of the Manufacturer and User Facility Device Experience database was conducted to identify the relevant MDRs and identify the types of adverse events reported for pedicle screw spinal systems on or before October 17, 2016. Results from this MDR analysis demonstrated that the same types of adverse events are present in the same relative incidence for SRS devices as noted in traditional rigid pedicle screw systems (i.e., the most common adverse events are device breakage, revision, and pain in all groups). FDA believes this evidence demonstrates that SRS devices have the same risks to health as rigid pedicle screw systems.

FDA additionally conducted an independent survey of literature published after the 2013 Panel related to the use of SRSs as an adjunct to fusion to assess current surgical practice and reported treatment outcome. FDA's literature search captured the articles identified previously in the comments as well as articles pertaining to additional SRS designs that have been cleared for marketing in the United States (Refs. 10 and 11). While only a subset of the 16 SRSs that have currently been determined to be substantially equivalent are represented in the literature, a wide range of currently cleared SRS designs is represented by this subset. The data demonstrated similar safety profiles for SRSs compared to traditional rigid pedicle screw systems. The adverse events reported in the literature for SRSs are similar to those cited in the Executive Summary for the 2013 Panel Meeting for traditional rigid pedicle screw systems used in currently class III indications that we proposed to reclassify to Class II rods (Ref. 2). Typical adverse events included pseudarthrosis, reoperation, screw loosening, and screw breakage. There were no reports of breakage of the longitudinal members of any of the SRSs studied.

The fusion rates of SRSs compare favorably to fusion rates of traditional systems for treatment of low-grade spondylolisthesis and DDD, which range from 78 to 100 percent and which the 2013 Panel deemed to be clinically acceptable to support reclassification for these indications (see the 2013 Panel Executive Summary for additional information (Ref. 2)). Based upon the currently available information, FDA agrees with the Panel's assessment that a fusion rate within the range of 78 to 100 percent would be clinically acceptable. Although the information presented to the 2013 Panel was limited in both the number of subjects and the number of SRSs represented, additional information that FDA received and considered after the 2013 Panel meeting supports FDA's determination that there is sufficient information to revise the proposed classification of SRSs from class III to II. FDA believes that the range of fusion rates found clinically acceptable by the 2013 Panel could serve as a performance parameter for providing reasonable assurance of safety and effectiveness for the device type based on the valid scientific evidence but due to some variability (e.g., design and material used) among individual devices, FDA has determined that clinical data are needed to demonstrate that each device with its specific characteristics (e.g., design and material used) and conditions of use meets that parameter. FDA believes that fusion rates higher than the current clinically acceptable range may be achieved with improvement in technology and, thus, may consider that factor in evaluating clinical data submitted from firms.

Based upon the information provided in response to the proposed order, and including additional analyses of the literature and MDRs since the 2013 Panel, FDA has determined that the risks to health are not substantially different from traditional rigid pedicle screw spinal systems. As discussed previously and in the 2014 Proposed Order, FDA agreed with the 2013 Panel that there is valid scientific evidence on the safety of rigid pedicle screw systems. FDA has also determined, as discussed previously, that an evaluation of additional MDR data and additional clinical literature provide valid scientific evidence regarding the safety of SRS devices for fusion (Refs. 3 to 11).

Whereas non-clinical performance testing appropriately mitigates the risks to health for rigid pedicle screw systems, non-clinical special controls are not sufficient to mitigate the risks to health, specifically, the risk of pseudarthrosis resulting in additional surgical procedures, for SRS devices. Non-clinical performance testing (such as standardized test methods or biomechanical testing of cadaveric specimens) does not adequately differentiate between different SRS technologies nor predict the ability to achieve spinal fusion with a particular SRS. While some SRSs can be tested using the typical bench testing as a means of comparing performance of traditional rigid pedicle screw systems (e.g., per ASTM F1717-15, “Standard Test Methods for Spinal Implant Constructs in a Vertebrectomy Model”), this testing may result in lower bending stiffness for SRSs than similarly sized uniform metallic rods (Ref. 12). Testing in accordance with ASTM F1717-15 is not typically used to evaluate SRS technologies as significant modifications to the test standards are often necessary to conduct the test. Given that the systems have not typically been tested in accordance with the accepted consensus standard and as standardized acceptance criteria for SRS technologies undergoing this testing have not been developed, it is challenging to solely use the results of non-clinical performance testing for comparison purposes to rigid pedicle screw systems.

While clinical data as a special control was not specifically mentioned in the comments, the 2013 Panel discussed the ability for clinical data to distinguish between successful and unsuccessful SRS device designs. FDA believes that clinical performance data would adequately mitigate the risks to health for SRS devices, particularly the risk of pseudarthrosis resulting in additional surgical procedures. In addition, there is sufficient valid scientific evidence showing that the device type is effective for use as an adjunct to fusion, when the fusion rate is within a clinically acceptable range, as discussed previously. FDA therefore believes there is sufficient information to establish special controls that, in addition to general controls, can provide a reasonable assurance of safety and effectiveness for SRSs. Table 1 summarizes how FDA believes the risks to health identified for SRSs can be mitigated by special controls, including clinical performance data.

As discussed in FDA's response to Comment 1, the risks to health and associated mitigation measures for rigid pedicle screw systems remain unchanged from those listed in table 1 of the 2014 Proposed Order.

As stated previously, FDA has reevaluated all of the valid scientific evidence for SRSs in finalizing this order. As described in the proposed order and in section I of this order, FDA has satisfied the requirements under section 515(i)(2) of the FD&C Act for revising the proposed classification for SRSs. Under section 515(i)(2) of the FD&C Act, FDA has the authority to issue an administrative order revising the proposed classification of a device for which FDA has classified as a class III device and for which no administrative order has been issued calling for PMAs under section 515(b) of the FD&C Act, so that the device is classified into class I or class II, after issuance of a proposed order, a meeting of a device classification panel, and consideration of the comments of a proposed order. In determining whether to revise the proposed classification of a device or to require a device to remain in class III, FDA applies the criteria set forth in section 513(a) of the FD&C Act. Section 513(a)(1)(B) of the FD&C Act defines class II devices as those devices for which the general controls in section 513(a)(1)(A) by themselves are insufficient to provide reasonable assurance of safety and effectiveness, but for which there is sufficient information to establish special controls to provide a reasonable assurance of safety and effectiveness of a device.

FDA has reviewed all of the initial procedures, scientific information presented at the 2013 Panel meeting, comments received from both the 2014 Proposed Order and 2009 Final Order under section 515(i)(1) of the FD&C Act calling for information on preamendment devices (74 FR 16214, April 9, 2009) for consideration of the classification of SRS devices under section 513(a) of the FD&C Act and has initiated revision of the proposed classification of the device under section 515(i)(2) of the FD&C Act.

The discussion at the 2013 Panel for SRSs was limited, as acknowledged by 2013 Panel members, by the small number of studies available at that time and reports in the MDRs regarding SRSs for fusion. Given limitations of the available data, in literature and MDR analysis, the 2013 Panel concluded that insufficient evidence was available to establish special controls. Although FDA recommended, and the 2013 Panel agreed, that a call for PMAs was the necessary measure to mitigate the risks to health for SRSs and ensure a reasonable assurance of safety and effectiveness, FDA has since reassessed the scientific evidence based upon comments received and additional information, reevaluating the scientific evidence presented at the 2013 Panel meeting to reconsider FDA's prior position regarding the necessary controls to provide reasonable assurance of safety and effectiveness for SRSs. Based on FDA's reevaluation of the available body of evidence, FDA has determined that sufficient information exists regarding the risks and benefits of SRSs for FDA to determine that general and special controls can provide reasonable assurance of the safety and effectiveness of the device type and, thus, revising the proposed classification for these devices from class III to II under section 515(i)(2) of the FD&C Act is appropriate.

Also, at the 2013 Panel meeting, the panel did discuss the feasibility of clinical data as being able to potentially distinguish between successful and non-successful SRS designs, without specifically discussing what level of data would be necessary. After further review of the scientific literature and comments, FDA believes that clinical performance data as a special control would adequately mitigate the risks to health for SRS devices, particularly the risk of pseudarthrosis resulting in additional surgical procedures (see response to Comment 10 in section II.B.2).

Upon reevaluation of the scientific evidence and additional information, FDA has determined that SRS devices do not have the degree of risk of illness or injury designed to be eliminated or reduced by requiring the device to have an approved PMA under section 515(b)(2) of the FD&C Act. In addition, the level of scientific evidence evaluated has allowed FDA to determine that SRSs can be classified as class II with the establishment of special controls because sufficient valid scientific evidence exists to determine that general controls, in combination with special controls, are sufficient to provide a reasonable assurance of safety and effectiveness. FDA has determined that revision of the proposed classification of SRSs under section 515(i)(2) of the FD&C Act will allow these devices to be classified in class II subject to a clinical performance data special control. As a result, instead of calling for PMAs for SRSs, FDA is finalizing this order to revise the proposed classification for SRS devices from class III to class II (special controls) following reassessment of all relevant scientific evidence and comments received from the 2014 Proposed Order. FDA believes the clinical performance data special control and other special controls, together with general controls, are sufficient to provide a reasonable assurance of safety and effectiveness for SRS devices.

Under sections 513(e) and 515(i) of the FD&C Act, FDA is adopting its findings as published in the preamble to the proposed order with the modifications discussed in section II of this final order. FDA is issuing this final order to reclassify rigid pedicle screw systems and to revise classification of SRSs when intended to provide immobilization and stabilization of spinal segments in the thoracic, lumbar, and sacral spine as an adjunct to fusion in the treatment of DDD and spondylolisthesis (other than either severe spondylolisthesis (grades 3 and 4) at L5-S1 or degenerative spondylolisthesis with objective evidence of neurologic impairment) when used as an adjunct to fusion from class III to class II and establish special controls for all SRSs by revising part 888. Rigid pedicle screw systems when intended to provide immobilization and stabilization of spinal segments in the thoracic, lumbar, and sacral spine as an adjunct to fusion in the treatment of DDD and spondylolisthesis (other than either severe spondylolisthesis (grades 3 and 4) at L5-S1 or degenerative spondylolisthesis with objective evidence of neurologic impairment) and SRSs for any indication must comply with the special controls identified in this order (see Section V, “Implementation Strategy”).

Section 510(m) of the FD&C Act provides that FDA may exempt a class II device from the premarket notification requirements under section 510(k) of the FD&C Act if FDA determines that premarket notification is not necessary to provide reasonable assurance of the safety and effectiveness of the devices. FDA has determined that premarket notification is necessary to provide reasonable assurance of safety and effectiveness of rigid pedicle screw systems and SRSs when intended to provide immobilization and stabilization of spinal segments in the thoracic, lumbar, and sacral spine as an adjunct to fusion in the treatment of DDD and spondylolisthesis (other than either severe spondylolisthesis (grades 3 and 4) at L5-S1 or degenerative spondylolisthesis with objective evidence of neurologic impairment). Therefore, these device types are not exempt from premarket notification requirements.

Following the effective date of this final order, firms marketing rigid pedicle screw systems when intended to provide immobilization and stabilization of spinal segments in the thoracic, lumbar, and sacral spine as an adjunct to fusion in the treatment of DDD and spondylolisthesis (other than either severe spondylolisthesis (grades 3 and 4) at L5-S1 or degenerative spondylolisthesis with objective evidence of neurologic impairment) and SRSs for any indication must comply with the special controls set forth in this order (see section V, “Implementation Strategy”).

The special controls identified in this final order are effective as of the date of publication of this order, December 30, 2016. Both rigid pedicle screw systems and SRSs covered by this order must comply with the special controls following the effective date of the order. Specifically, devices subject to the special controls in this order include rigid pedicle screw systems intended to provide immobilization and stabilization of spinal segments in the thoracic, lumbar, and sacral spine as an adjunct to fusion in the treatment of DDD and spondylolisthesis (other than either severe spondylolisthesis (grades 3 and 4) at L5-S1 or degenerative spondylolisthesis with objective evidence of neurologic impairment), and SRSs for any indication. However, FDA does not intend to enforce compliance with the special controls for currently legally marketed SRSs covered by this order until June 28, 2018. The 30-month enforcement discretion period was selected based on the following factors: (1) The 2014 Proposed Order initially called for PMAs containing clinical performance data to be submitted within a 30-month timeframe, and thus the request in this final order for 510(k) amendments, which include submission of clinical performance data as a special control, maintains the same expectation of sponsors; and (2) the effectiveness endpoint of fusion for SRSs is generally assessed at 1 to 2 years post-implantation, and thus if a new study were to be initiated to collect clinical performance data, FDA would expect the 30-month period to be appropriate for SRS and allow sponsors sufficient time to enroll patients, conduct the study, and analyze the data.

For those manufacturers who wish to continue to offer for sale currently legally marketed SRSs covered by this order, FDA expects them to submit an amendment to their previously cleared 510(k)s for the devices by June 28, 2018 that demonstrates compliance with the special controls. This approach is consistent with prior final orders for reclassifications of preamendment devices in which special controls requiring submission of clinical performance data were issued. An amendment to a 510(k) will be added to the 510(k) file but will not serve as a basis for a new substantial equivalence review. A submitted 510(k) amendment in this context will be used solely to demonstrate to FDA that an SRS system is in compliance with the special controls. If a 510(k) amendment for the device is not submitted by June 28, 2018 or if FDA determines that the amendment does not demonstrate compliance with the special controls, then this compliance policy would not apply, and FDA would intend to enforce compliance with these requirements. In that case, the device is deemed adulterated under section 501(f)(1)(B) of the FD&C Act (21 U.S.C. 351(f)(1)(B)) as of the date of FDA's determination of noncompliance or June 28, 2018, whichever is sooner.

For rigid pedicle screw systems intended to provide immobilization and stabilization of spinal segments in the thoracic, lumbar, and sacral spine as an adjunct to fusion in the treatment of DDD and spondylolisthesis (other than either severe spondylolisthesis (grades 3 and 4) at L5-S1 or degenerative spondylolisthesis with objective evidence of neurologic impairment) and SRSs for any indication that have not been legally marketed prior to December 30, 2016, or models that have been legally marketed but are required to submit a new 510(k) under 21 CFR 807.81(a)(3) because the device is about to be significantly changed or modified, manufacturers must obtain 510(k) clearance, among other relevant requirements, and demonstrate compliance with the special controls included in this final order, before marketing the new or changed device.

The Agency has determined under 21 CFR 25.34(b) that this action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required.

This final order refers to previously approved collections of information found in FDA regulations. These collections of information are subject to review by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). The collections of information in part 807, subpart E, have been approved under OMB control number 0910-0120 and the collections of information under 21 CFR part 801 have been approved under OMB control number 0910-0485.

Prior to the amendments by FDASIA, section 513(e) of the FD&C Act provided for FDA to issue regulations to reclassify devices. Although section 513(e) as amended requires FDA to issue final orders rather than regulations, FDASIA also provides for FDA to revoke previously promulgated regulations by order. FDA will continue to codify classifications and reclassifications in the CFR. Changes resulting from final orders will appear in the CFR as changes to codified classification determinations or as newly codified orders. Therefore, pursuant to section 513(e)(1)(A)(i) of the FD&C Act, as amended by FDASIA, in this final order, we are revoking the requirements in § 888.3070 related to the classification of rigid pedicle screw systems and SRSs when intended to provide immobilization and stabilization of spinal segments in the thoracic, lumbar, and sacral spine as an adjunct to fusion in the treatment of DDD and spondylolisthesis (other than either severe spondylolisthesis (grades 3 and 4) at L5-S1 or degenerative spondylolisthesis with objective evidence of neurologic impairment) as class III devices. We are codifying the reclassification of rigid pedicle screw systems and SRSs when intended to provide immobilization and stabilization of spinal segments in the thoracic, lumbar, and sacral spine as an adjunct to fusion in the treatment of DDD and spondylolisthesis (other than either severe spondylolisthesis (grades 3 and 4) at L5-S1 or degenerative spondylolisthesis with objective evidence of neurologic impairment) into class II (special controls). In addition, as set forth in the 2014 Proposed Order, FDA has separated SRSs, a subtype of pedicle screw systems, from rigid pedicle screw systems in the identification section of the classification regulation (§ 888.3070(a)) and has established a separate subpart of the classification regulation (§ 888.3070(b)(3)), which is applicable to all SRSs regardless of indication.

The following references are on display in the Division of Dockets Management (HFA-305), Food and Drug Administration, 5630 Fishers Lane, Rm. 1061, Rockville, MD 20852, and are available for viewing by interested persons between 9 a.m. and 4 p.m., Monday through Friday; they are also available electronically at https://www.regulations.gov. FDA has verified the Web site addresses, as of the date this document publishes in the Federal Register, but Web sites are subject to change over time.

Therefore, under the Federal Food, Drug, and Cosmetic Act and under authority delegated to the Commissioner of Food and Drugs, 21 CFR part 888 is amended as follows:

This document contains final regulations in Title 26 of the Code of Federal Regulations under section 6041 of the Internal Revenue Code. The final regulations replace the existing information reporting requirements under § 7.6041-1 of the Temporary Income Tax Regulations under the Tax Reform Act of 1976 for persons who make reportable payments of bingo, keno, or slot machine winnings. The new requirements are set forth in a new § 1.6041-10 of the regulations. Because the new requirements replace the existing requirements, the regulations under § 7.6041-1 are being removed.

On March 4, 2015, the Treasury Department and the IRS published a notice of proposed rulemaking (REG-132253-11) in the Federal Register, 80 FR 11600, containing proposed regulations that would update the existing rules and add rules for electronically tracked slot machine play, payee identification, and an optional aggregate reporting method.

A public hearing was held on June 17, 2015, and five speakers provided testimony. In addition, over 14,000 written public comments were received. After careful consideration of the written comments and statements made during the hearing, the proposed regulations are adopted as modified by this Treasury Decision.

All of the 14,000 written comments on the notice of proposed rulemaking were considered and are available at regulations.gov or upon request. Many of these comments addressed similar issues and expressed similar points of view. These comments are summarized in this preamble. Comments pertaining to parimutuel gambling in the case of horse races, dog races, and jai alai are being considered in a separate regulations project under section 3402(q).

Commentators supported the proposed rules regarding filing requirements and the form and content of the information returns required to be filed. Accordingly, the Treasury Department and the IRS conclude that the final regulations should adopt the filing requirements without modification.

The proposed regulations created rules for electronically tracked slot machine play, which was defined in proposed § 1.6041-10(b)(1) as slot machine play where an electronic player system controlled by the gaming establishment (such as through the use of a player's card or similar system) records the amount a specific individual wins and wagers on slot machine play. Section 1.6041-10(b)(2)(i)(D) of the proposed regulations provided that gambling winnings for electronically tracked slot machine play are required to be reported if (1) the total amount of winnings netted against the total amount of wagers during the same session of play was $1,200 or more, and (2) at least one single win during the session was $1,200 or more without regard to the wager. A “session” of play was determined with reference to a calendar day. The changes were intended to facilitate reporting by payees on their individual income tax returns under the proposed safe harbor in Notice 2015-21, 2015-12 I.R.B. 765.

Some commentators expressed concern regarding the feasibility of the proposed rules given existing technology and recommended that the proposed rules not be adopted. Commentators stated that one of the purposes of electronic player systems was for marketing and customer loyalty and that current systems should not be used as a mandatory method for tracking winnings and wagers for purposes of tax reporting. Moreover, commentators stated that the use of electronic player systems for tax reporting may chill customer use and have a negative effect on customer relations. In addition, some commentators stated that their electronic player systems lack the necessary controls to be used for tax reporting, and that implementing such controls may be costly and labor-intensive. Based on these comments, the final regulations do not adopt the proposed rules for electronically tracked slot machine play.

The proposed regulations retain the rule in § 7.6041-1(c)(3) of the Temporary Income Tax Regulations that the payor must obtain two forms of identification from the payee to verify the payee's identity. However, § 1.6041-10(f) of the proposed regulations modifies the rules for acceptable identification by requiring that one of the forms of identification include the payee's photograph and by providing that the payor may accept a properly completed Form W-9 in lieu of identification that includes the payee's social security number. The proposed regulations provide that payors may rely on this provision prior to publication of final regulations in the Federal Register.

Most commentators supported the proposed rules regarding the types of identification that can be relied on to verify a payee's identity. In particular, commentators supported the provision that allows a Form W-9 to be used as an acceptable means of verifying a payee's identity in lieu of identification that includes the payee's social security number. This rule is consistent with procedures currently used by many payors to address the fact that, today, most forms of identification that payees carry with them do not contain a social security number.

Other commentators suggested that the list of examples of acceptable forms of government-issued identification be expanded to include tribal member identification cards issued by a federally recognized Indian tribe. Some commentators also suggested that an exception from the photo identification requirement be provided for tribal identification cards presented at tribal government gaming facilities because many tribal identification cards do not contain photographs.

In response to the comments received, the list of examples of acceptable government-issued identification has been expanded in § 1.6041-10(e)(1) of the final regulations to include tribal member identification cards issued by a federally recognized Indian tribe. In addition, in response to comments, § 1.6041-10(d)(2) of the final regulations provides an exception to the photo identification requirement if one of the forms of identification is a tribal identification card presented at a gaming establishment owned or licensed by the tribal government that issued the tribal member identification card.

Section 1.6041-10(h) of the proposed regulations provides a new rule for an optional aggregate reporting method. Under § 7.6041-1(a), reporting of gambling winnings from bingo, keno, and slot machine play is required each time a payor makes a payment of reportable gambling winnings (i.e., a payment that meets the reporting threshold). The aggregate reporting method allows a payor who makes more than one payment of reportable gambling winnings to the same payee from the same type of game during a “session” to report the aggregate amount of such reportable gambling winnings on one Form W-2G, provided the payor satisfies certain recordkeeping requirements set forth in the regulations. Under § 1.6041-10(b)(3) of the proposed regulations, a “session” is generally defined as a period of play that begins when a patron places the first wager on a particular type of game at a gaming establishment and ends when the patron places his or her last wager on the same type of game before the end of the same calendar day at the same gaming establishment. This aggregate reporting method may be used at the payor's option. The proposed regulations provide that payors may rely on this provision prior to publication of final regulations in the Federal Register.

Commentators were generally supportive of the proposed optional aggregate reporting method but did suggest some changes. Accordingly, the final regulations adopt the proposed optional aggregate reporting method with some modifications.

First, the period for purposes of the aggregate reporting method in the final regulations is not referred to as a “session.” Rather, in § 1.6041-10(g) of the final regulations, the period used for purposes of the aggregate reporting method is now referred to as an “information reporting period.” The proposed regulations' definition of a “session” was intended to mirror the concept of “session” set forth in the safe harbor for the determination of wagering gains and losses from electronically tracked slot machine play that was published in a Notice and draft Revenue Procedure on the same date as the proposed regulations. Notice 2015-21. The Treasury Department and the IRS are still considering the income tax reporting rules in this area, and the draft Revenue Procedure has not been finalized. Therefore, to avoid confusion, the aggregate reporting method rules in § 1.6041-10(g) of the final regulations have been modified so that the period during which reporting may be aggregated is referred to as the “information reporting period” rather than as a “session.”

Second, commentators suggested that rather than a calendar day, payors should have the option of using the 24-hour period known commonly in the industry as the “gaming day” for purposes of the aggregate reporting method. The comments explained that the period of a “gaming day” is used by gaming establishments for financial accounting, gaming control board, and other regulatory purposes, and allows each establishment the flexibility to define a day for these purposes by taking into account peak gaming times. The “gaming day” period is also utilized in complying with anti-money laundering reporting obligations. According to the comments, a gaming day is a 24-hour period that ends at a time during which the gaming establishment is closed or when business is slowest, typically between 3 a.m. and 6 a.m. The comments indicate that allowing payors to use the same period for purposes of information reporting as for other regulatory purposes will enhance the benefits of aggregate reporting for payors by not having a different reporting period for tax reporting, and by allowing aggregate reports to be generated during non-peak gaming times.

To give payors more flexibility, the final regulations adopt these suggestions and provide a flexible “information reporting period” as the period to be used for aggregate reporting. Under § 1.6041-10(b)(2) of the final regulations, an “information reporting period” is either a “calendar day” or a “gaming day,” so long as that period is applied uniformly by the payor to all payees during the calendar year. A payor may adopt a different “information reporting period” from one calendar year to the next, but may not change the “information reporting period” in the middle of a calendar year. Changes to a payor's “information reporting period” from one calendar year to the next must be implemented on January 1. In addition, the final regulations provide that on December 31st, all open information reporting periods must end at 11:59 p.m. in order to end by the end of the calendar year. This rule is necessary to maintain calendar year federal income tax reporting that is the bedrock of the information reporting regime and that is required by section 6041. Section 1.6041-10(b)(2)(iii) of the final regulations provides that if a “gaming day” is adopted for a calendar year, the information reporting period for December 31st ends at 11:59 p.m. on December 31, and the information reporting period for January 1st begins at 12 a.m. on January 1, regardless of the number of hours of the December 31st and January 1st information reporting periods.

Third, commentators noted that the proposed regulations did not specifically define “gaming establishment,” and how to deal with common ownership between various casinos. Section 1.6041-10(b)(2)(iv) of the final regulations defines the term “gaming establishment” as a business entity of a payor of reportable gambling winnings with respect to bingo, keno, or slot machine play, and includes all gaming establishments owned by the payor using the same employer identification number (EIN) issued to such payor in accordance with section 6109.

Finally, commentators requested that the proposed recordkeeping requirements with respect to aggregate reporting be updated to reflect the actual credentials held by various casino representatives. These recordkeeping requirements require that payors maintain a record of every payment that will be reported using the aggregate reporting method and that each entry in the record be verified by a designated casino representative. Section § 1.6041-10(g)(3)(vii) of the proposed regulations requires that the designated individual provide a gaming license number. The final regulations do not require that a gaming license number be provided. Instead, § 1.6041-10(g)(3)(vii) of the final regulations requires that the person authorized by the applicable gaming regulatory control authority to ensure accuracy in reporting provide his or her unique identification number.

The proposed rules maintained the reporting thresholds of $1,200 for bingo and slot machine play and $1,500 for keno in § 7.6041-1(a), but invited comments on the feasibility of reducing these thresholds. Commentators overwhelmingly opposed the idea of reducing these reporting thresholds. Payors opposed lowering the thresholds because it would result in more reporting, which would increase compliance burdens for the industry. In fact, many commentators suggested that rather than reducing the current thresholds, they should be increased to account for inflation. These final regulations do not change the existing reporting thresholds for bingo, keno, and slot machine play.

The proposed regulations retain the rules in § 7.6041-1(b) that, in determining whether the reporting threshold is satisfied, the amount of winnings from bingo and slot machine play is not reduced by the amount of the wager, but the amount of winnings from one keno game is reduced by the amount of the wager in that one game. Commentators were divided as to whether uniform application of netting the wager against the winnings was feasible, citing compliance cost and labor concerns. In light of these concerns, the Treasury Department and the IRS conclude that the existing approach, as described in the proposed regulations, should be retained. Accordingly, § 1.6041-10(b)(1)(i) of the final regulations provides that reportable gambling winnings in the case of bingo and slot machine play are not determined by netting the wager against the winnings, but reportable gambling winnings in the case of keno are determined by netting the wager in that one game against the winnings from that game.

For purposes of information reporting, proposed § 1.6041-10(b)(4) defines a slot machine as a device that, by application of the element of chance, may deliver or entitle the person playing or operating the device to receive cash, premiums, merchandise, or tokens, whether or not the device is operated by inserting a coin, token, or similar object. One commentator suggested that the definition of slot machines be changed to adopt either of the definitions that has been adopted by the states of New Jersey or Nevada, both of which define slot machines more broadly. Other commentators suggested that the definition of slot machine in the proposed regulations is too broad because it could include technologic aids to Class II gaming as defined under the Indian Gaming Regulatory Act, 25 U.S.C. 2701-2721, such as electronic bingo or electronic pull-tabs.

As discussed in the preamble of the proposed regulations, the definition of slot machine in proposed § 1.6041-10(b)(4) is intended to be consistent with the definition of slot machine in § 44.4402-1(b)(1) of the Wagering Tax Regulations. Having consistent definitions benefits tax administration and may prevent unintended confusion that could arise from having different definitions for federal tax purposes. Because the Treasury Department and the IRS conclude that, on balance, the proposed definition of slot machine is the most appropriate definition, the final regulations adopt the proposed definition of the term “slot machine” without modification.

Section 1.6041-10(b)(2)(i) of the proposed regulations provides that all winnings from all cards played during one bingo game are combined and that all winnings from all “ways” on a multi-way keno ticket are combined. In addition, § 1.6041-10(b)(2)(ii) of the proposed regulations provides that winnings from different types of games are not combined to determine whether the reporting thresholds are satisfied, and that bingo, keno, and slot machine play are all different types of games. Commentators did not oppose inclusion of these rules in the definition of reportable gambling winnings in the proposed regulations. Accordingly, the final regulations adopt these aspects of the definition of reportable gambling winnings without modification.

Certain IRS regulations, including this one, are exempt from the requirements of Executive Order 12866, as supplemented by Executive Order 13563. Therefore, a regulatory assessment is not required.

It is hereby certified that this rule will not have a significant economic impact on a substantial number of small entities. This certification is based on the fact that this rule merely provides guidance as to the filing of information reporting returns for payors who make reportable payments of bingo, keno, or slot machine winnings and who are required by section 6041 to make returns reporting those payments. The requirement for payors to make information returns is imposed by statute and not these regulations. In addition, this rule reduces the existing burden on payors to comply with the statutory requirement by simplifying the process for payors to verify payees' identities with a broader range of documents that are more readily available, and also by allowing payors to reduce the number of information returns they issue if they adopt the new aggregate reporting methodology. Therefore, a regulatory flexibility analysis under the Regulatory Flexibility Act (5 U.S.C. Chapter 6) is not required.

Pursuant to section 7805(f) of the Internal Revenue Code, the notice of proposed rulemaking preceding these regulations was submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on the regulations' impact on small businesses, and no comments were received.

The principal author of these regulations is David Bergman of the Office of Associate Chief Counsel (Procedure & Administration).

Accordingly, 26 CFR parts 1, 7, and 31 are amended as follows:

The Coast Guard will enforce the safety zone listed in 33 CFR 165.160 on the specified date and time as indicated in Table 1 below. This regulation was published in the Federal Register on November 9, 2011 (76 FR 69614).

Under the provisions of 33 CFR 165.160, vessels may not enter the safety zone unless given permission from the COTP or a designated representative. Spectator vessels may transit outside the safety zones but may not anchor, block, loiter in, or impede the transit of other vessels. The Coast Guard may be assisted by other Federal, State, or local law enforcement agencies in enforcing this regulation.

This notice is issued under authority of 33 CFR 165.160(a) and 5 U.S.C. 552(a). In addition to this notice in the Federal Register, the Coast Guard will provide mariners with advanced notification of enforcement periods via the Local Notice to Mariners and marine information broadcasts.

If the COTP determines that a safety zone need not be enforced for the full duration stated in this notice, a Broadcast Notice to Mariners may be used to grant general permission to enter the safety zone.

Administrative Procedure Act: Section 553(d) of the Administrative Procedure Act (APA), 5 U.S.C. Chapter 5, generally provides that rules may not take effect earlier than 30 days after they are published in the Federal Register. The Environmental Protection Agency (EPA) is issuing this final rule under section 307(d)(1) of the Clean Air Act, which states: “The provisions of section 553 through 557 . . . of Title 5 shall not, except as expressly provided in this section, apply to actions to which this subsection applies.” Thus, section 553(d) of the APA does not apply to this rule. The EPA is nevertheless acting consistently with the purposes underlying APA section 553(d) in making this rule effective no later than January 1, 2017. Section 553(d) allows an effective date less than 30 days after publication for a rule that “grants or recognizes an exemption or relieves a restriction” or “as otherwise provided by the agency for good cause found and published with the rule.” The EPA finds that there is good cause for this rule to become effective immediately, because this rule removes a restriction. Specifically, this final rule removes the requirement for states to install air quality monitors in certain areas by January 1, 2017.

Judicial Review: This is a nationally applicable rulemaking because it revises generally applicable monitoring network requirements. Even if this rulemaking were not considered nationally applicable, EPA has determined that this action is of nationwide scope and effect because the monitors that will no longer be required under this rulemaking are located in 28 states, which fall within the jurisdiction of all 10 federal courts of appeals. Therefore, under CAA section 307(b)(1), judicial review of this final rule is available only by filing a petition for review in the U.S. Court of Appeals for the D.C. Circuit by February 28, 2017.

The following topics are discussed in this preamble:

On February 9, 2010, the EPA promulgated minimum monitoring requirements for the ambient NO2 monitoring network in support of the revised NO2 NAAQS (75 FR 6474; February 9, 2010). The 2010 NO2 NAAQS revision introduced a 1-hour standard with a 98th percentile form averaged over 3 years and a level of 100 parts per billion (ppb), reflecting the maximum allowable NO2 concentration anywhere in an area, while retaining the annual standard of 53 ppb.

As part of the 2010 NO2 NAAQS rulemaking, the EPA promulgated revisions to requirements for minimum numbers of ambient NO2 monitors which included new monitoring near major roads in larger urban areas, requirements to characterize NO2 concentrations representative of wider spatial scales in larger urban areas (area-wide monitors), and monitors intended to characterize NO2 exposures of susceptible and vulnerable populations. Specifically, the requirements for these minimum monitoring requirements that were promulgated in 2010 were as follows:

(a) The first tier of the ambient NO2 monitoring network required near-road monitoring.1 The requirements included the placement of one near-road NO2 monitoring station in each CBSA with a population of 500,000 or more persons to monitor a location of expected maximum hourly concentrations sited near a major road. An additional near-road NO2 monitoring station was required at a second location of expected maximum hourly concentrations for any CBSA with a population of 2,500,000 or more persons, or in any CBSA with a population of 500,000 or more persons that has one or more roadway segments with 250,000 or greater Annual Average Daily Traffic (AADT) counts. Based upon 2010 census data and data maintained by the U.S. Department of Transportation's Federal Highway Administration on the most heavily trafficked roads in the U.S. (http://www.fhwa.dot.gov/policyinformation/tables/02.cfm), approximately 126 near-road NO2 sites were required within 103 CBSAs nationwide at the time of rule promulgation.

(b) The second tier of the NO2 network required area-wide NO2 monitoring,2 where area-wide means that the monitor is representative of a spatial scale of representativeness of neighborhood scale (0.5 to 4 km in dimension) or larger, as defined in 40 Code of Federal Regulations (CFR) part 58, appendix D, section 1.2. Requirements included the placement of one monitor in each CBSA with a population of 1,000,000 or more persons to monitor a location of expected highest NO2 concentrations representing the neighborhood or larger spatial scales. Based on 2010 census data, approximately 52 area-wide NO2 sites were required within 52 CBSAs at the time of rule promulgation.

(c) The third tier of the NO2 minimum monitoring requirements was for the characterization of NO2 exposure for susceptible and vulnerable populations.3 The EPA Regional Administrators, in collaboration with states, required 40 NO2 monitoring stations nationwide in any area, inside or outside of CBSAs, in addition to the minimum monitoring requirements for near-road and area-wide monitors, with a primary focus on monitoring in locations with susceptible and vulnerable populations. Monitoring sites intended to satisfy these NO2 minimum monitoring requirements were required to be submitted to the EPA for approval. Per 40 CFR 58.10 and 58.13, states were required to submit a plan to the EPA for establishing required area-wide NO2 monitoring sites and those NO2 monitoring sites intended to represent areas with susceptible and vulnerable populations by July 1, 2012, and ensure that the monitoring stations were operational by January 1, 2013. State and local air monitoring agencies fulfilled the requirements for area-wide monitors and those sites representing areas with susceptible and vulnerable populations on schedule.

The near-road component of the ambient NO2 monitoring network was also originally required to be completely operational by January 1, 2013. However, in 2012, the EPA proposed (77 FR 64244; October 19, 2012) and then finalized in 2013 (78 FR 16184; March 14, 2013), through a public notice and comment rulemaking, a requirement that the near-road NO2 monitoring stations be installed in three phases. The revised installation schedule allowed more time for states to establish the near-road NO2 network on a schedule consistent with available resources. The revised installation schedule for the near-road NO2 monitoring network was modified to reflect the following:

Phase 1: In CBSAs with a population of 1,000,000 or more persons, one near-road NO2 monitor shall be reflected in the state Annual Monitoring Network Plan submitted July 1, 2013, and that monitor shall be operational by January 1, 2014.

Phase 2: In CBSAs where two near-road NO2 monitors are required (either because the CBSA has a population of 2,500,000 or more persons, or has a population of 500,000 or more persons plus one or more roadway segments having AADT counts of 250,000 or more), the second near-road NO2 monitor shall be reflected in the state Annual Monitoring Network Plan submitted July 1, 2014, and that monitor shall be operational by January 1, 2015.

Phase 3: In CBSAs with a population of at least 500,000 persons, but less than 1,000,000 persons, one near-road NO2 monitor shall be reflected in the state Annual Monitoring Network Plan submitted July 1, 2016, and the monitor shall be operational by January 1, 2017.

As of November of 2016, the EPA estimates that 69 near-road NO2 monitors are in operation. At the time of this rulemaking, the EPA notes that a handful of near-road sites (4 from Phase 1 and 6 from Phase 2) are still in the process of being installed due to various delays at the state and local level. A review of near-road site meta-data indicate that state and local air monitoring agencies have successfully installed these new monitors in the appropriate locations, collectively placing monitors adjacent to highly trafficked roads in their respective CBSAs. The latest available near-road NO2 monitoring site meta-data can be found at http://www3.epa.gov/ttn/amtic/nearroad.html.

We proposed revisions to the near-road NO2 minimum monitoring requirements (81 FR 30224) on May 16, 2016, to remove the requirement for near-road NO2 monitoring stations in CBSAs having populations between 500,000 and 1,000,000 persons, also known as Phase 3 of the near-road NO2 network. The proposal also included a revision to the requirement for a second near-road NO2 monitor in any CBSA having 500,000 or more persons that also had one or more road segments with 250,000 or greater AADT counts to only apply to CBSAs having 1,000,000 or more persons, which was intended to align all near-road NO2 monitoring requirement language to only apply to those CBSAs having 1,000,000 persons or more.

The proposed removal of Phase 3 of the required near-road NO2 network was based on empirical data and technical rationale, which were discussed in detail in the preamble to the proposed rule and supported by the Near-road NO2 Network and Data Analysis memo to the docket (docket memo) located at https://www.regulations.gov/docket?D=EPA-HQ-OAR-2015-0486. The three key foundations of the proposal were that:

• The Phase 1 and Phase 2 near-road sites that have been installed to date are located at maximum concentration locations consistent with the guidance in the Near-road NO2 Monitoring Technical Assistance Document (TAD) (http://www3.epa.gov/ttn/amtic/files/nearroad/NearRoadTAD.pdf) as demonstrated by a detailed examination of site meta-data.

• The higher populated CBSAs that contain these near-road NO2 sites have higher mobile source emissions and associated indicators, such as Vehicle Miles Traveled (VMTs), than lesser populated CBSAs.

• Ambient concentrations collected at all existing near-road monitoring sites are well below both the annual and 1-hour daily maximum NAAQS levels of 53 ppb and 100 ppb, respectively.

The EPA received 22 individual submissions on the proposal during the public comment period from public health and environmental groups, industry groups, state and local air monitoring agencies and multi-agency groups, and one anonymous public commenter.4

Overall, 18 of the 22 commenters supported the proposal. This included all 14 state or multi-state groups: Association of Air Pollution Control Agencies (AAPCA); Akron Regional Air Quality Management District (ARAQMD); Central States Air Resource Agencies Association (CENSARA); Colorado; Georgia; Iowa; Kentucky; Michigan; National Association of Clean Air Agencies (NACAA); Northeast States for Coordinated Air Use Management (NESCAUM); North Carolina; Regional Air Pollution Control Agency, Dayton, OH (RAPCA); South Carolina; and Wisconsin. In addition, all 4 of the industry commenters voiced support of the proposal, including: American Petroleum Institute (API); American Road and Transportation Builders Association (ARTBA); NAAQS Implementation Coalition; and the Utility Air Regulatory Group (UARG).

Those commenters who supported the proposal primarily reiterated that the use of existing network data and meta-data, plus other supporting data, provide the rationale necessary to finalize the proposed changes to remove requirements for Phase 3 monitors from the near-road NO2 network requirements. For example, AAPCA stated that the “. . . [proposed] revision is based on clear evidence from Phases 1 and 2 of the near-road network . . .” and ultimately that the data “. . . demonstrate the need to remove the monitoring requirements for Phase 3.” The API noted that “the Agency's phased monitoring approach has provided EPA the time to collect and analyze early monitoring data, and therefore develop a more accurate view of NO2 concentrations near roads.” The API went on to state that “near-road NO2 levels in 1,000,000 resident cities represent current high end exposures which are expected to decrease due to improving fleet fuel efficiency and turnover, the same is true for smaller cities addressed by Phase 3.” Other commenters also noted Tier 3 Motor Vehicle Emissions and Fuel standards,5 which the EPA expects to reduce on-road emissions that directly contribute to near-road NO2 concentrations going into the future. For example, the Iowa Department of Natural Resources stated that “NOx emissions from mobile sources are expected to decrease with implementation of the Tier 3 engine and fuel standards. . . .” Finally, NACAA commented that its “. . . monitoring experts agree with EPA's conclusion that data collected from Phase 3 monitors, which would be located in relatively smaller CBSAs, would almost certainly measure lower or similar NO2 concentrations [than those measured in the larger CBSAs].”

Those commenters who opposed the proposed rule included all 3 submissions from public health and environmental groups. The first of the three adverse comment submissions was collectively from the following entities: Asthma and Allergy Network, Alliance of Nurses for Healthy Environments, American Lung Association, American Public Health Association, American Thoracic Society, Asthma and Allergy Foundation of America, Children's Environmental Health Network, and Health Care Trust for America's Health. For convenience, through the remainder of this preamble, this group will be referred to as the “Public Health Organizations.” The second submission with adverse comments was collectively from the following entities: Earth Justice, Catholic Charities of the Diocese of Stockton, Clean Air Council, Clean Wisconsin, Midwest Environmental Defense Center, Natural Resources Defense Council, Valley Improvement Projects, and We Act for Environmental Justice. For convenience through the remainder of this preamble, this second group will be referred to as the “Environmental Groups.” The third submission with adverse comment to the proposed rule was from Clean Air Watch.

The key issues raised in those adverse comments include: (1) Arguments that the proposal is inconsistent with the original reasoning behind the establishment of the near-road network requirements in the 2010 NO2 NAAQS rulemaking; (2) issues related to the near-road NO2 network design and its installation; and (3) the empirical data relied on in the rationale for the proposed rule, which commenters criticized as being of relatively limited duration and representation.

In regard to the assertion that the proposal is inconsistent with the original reasoning behind the establishment of the near-road network, the Environmental Groups and Clean Air Watch both cited rationale provided in the 2010 NO2 NAAQS rulemaking that was used to establish the original requirements for the near-road NO2 network. They stated that the reasoning behind needing the network as it was originally required has presently not changed. The Environmental Groups stated that “EPA's proposal to eliminate the requirement to install near-road monitors in areas below 1 million people is fundamentally inconsistent with EPA's prior conclusion, and with the facts EPA found to support it.” The Clean Air Watch noted that after the 2010 NO2 NAAQS revision the Administrator had highlighted that there would be many new roadside monitors going into place.

The EPA disagrees that the rationale for this action is inconsistent with the 2010 rule. Rather, the revision to the 2010 rule's near-road monitoring provisions is based on the EPA's evaluation of monitoring data generated after issuance of the 2010 rule. The EPA notes that the key objective of the 2010 revision to the NO2 NAAQS was to limit exposure to peak NO2 concentrations that occur anywhere in an area. In recognition of the fact that the majority of exposure risks were found to be tied to mobile sources and the lack of specific information concerning the concentrations of NO2 in the near-road environment that was available at the time, the near-road NO2 monitoring network was required to address this lack of characterization. In the 2009 NO2 NAAQS proposal, the agency noted that the NO2 monitoring network at that time was “. . .not oriented to address peak concentrations, such as the on-road and near-road environment. . .” (74 FR 34440). At the time of that proposal and the promulgation of the 2010 final rule, there was a limited amount of near-road monitored data, which consisted mostly of integrated and continuous concentration data from research studies as opposed to compliance-quality data suitable for comparison to the NAAQS. The agency used those limited data in conjunction with information collected and presented in the Integrated Science Assessment (https://www.regulations.gov/document?D=EPA-HQ-OAR-2006-0922-0048) and the Risk and Exposure Assessment (https://www.regulations.gov/document?D=EPA-HQ-OAR-2006-0922-0047) to finalize the network design that originally required at least one monitor in all CBSAs having populations of 500,000 persons or more. As was noted by several commenters on the May 2016 proposal for this rule, the final 2010 network design was described as a near-road network that would provide “. . . data from a geographically and spatially diverse set of CBSAs that supports the intent of the revised NAAQS . . .” (75 FR 6508).

Subsequent to the 2010 NO2 NAAQS rulemaking, the EPA has received and evaluated data from near-road NO2 monitors installed in response to the requirements of the rule. As of November 2016, there are 69 operating near-road NO2 sites, with an ever increasing data record. Due to the establishment and operation of these near-road NO2 monitors, the EPA and the public now have a significantly better understanding of what ambient, near-road concentrations look like across a geographically diverse set of urban areas of differing population sizes, including several CBSAs with populations under 1,000,000 persons, than we did in 2010. It is the evaluation of these new data, not a change in the EPA's view that the near-road network reflects areas of peak NO2 concentration, which led to the EPA's conclusion that the requirement to operate additional near-road NO2 sites required by Phase 3 of the network is no longer necessary to provide adequate characterization on a national basis. These new data, which were not available during the 2010 NO2 NAAQS rulemaking provide the EPA with a different and improved understanding of near-road NO2 concentrations compared to the time when the network was originally required. In particular, these new data show that NO2 concentrations from sites adjacent to some of the nation's highest trafficked roads in the most populated CBSAs (i.e., expected maximum concentrations sites in the near-road environment) are not exceeding or even threatening to approach the level of the NAAQS. It is, therefore, evident that the degree of geographic and spatial diversity required of the near-road network is less than originally thought. Accordingly, the agency believes it is appropriate to reconsider the necessity of Phase 3 of the near-road NO2 network by leveraging empirical evidence and targeted assessments and analyses of available near-road NO2 network information, as explained in more detail in the docket memo associated with this action.

The second issue raised by the Environmental Groups and Public Health Organizations was in regard to the network design and physical characteristics of the existing near-road NO2 network. The Public Health Organizations stated that “limiting the required monitoring to only one or two locations in cities with millions of people severely limits the information available on near-road exposure in metropolitan areas.” The Environmental Groups stated that “the information relied upon by EPA does not show that the near-road monitors installed to date have been located to detect maximum [NO2] levels.” Finally, the Public Health Organizations also stated that “new research examining the early results of some of these near-road monitors warn that the assumptions made in the initial siting decisions may not adequately reflect the wors[t] sources of highway emissions, even in major urban areas like Los Angeles.”

With regard to the Public Health Organizations' comment that the amount of near-road monitoring in a given urban area is limited, the EPA disagrees that additional monitors are needed. The network design targets expected maximum concentrations in the near-road environment. In the 2010 NO2 NAAQS rulemaking, the near-road NO2 network was required to be installed with consideration of six key factors: AADT, fleet mix, congestion patterns, roadway design, terrain, and meteorology. These factors varied by CBSA, where quantitative data was variable in availability and quality. The consideration of these six factors was required so that near-road monitors would be placed at locations in near-road environments where peak NO2 concentrations, derived from on-road mobile sources, would be most likely to be observed within that CBSA. Because of this specific objective of the network, the need for multiple other near-road monitoring sites, above what is already required within a given CBSA to ascertain compliance with the NAAQS, is minimized.

The EPA strongly disagrees with the assertion that the near-road monitors installed to date have not been located to detect maximum NO2 levels. The agency handled this issue through siting requirements in the CFR and through additional support via the production of the TAD. The TAD was created through collaboration amongst multiple offices across the agency, state and local air quality management agencies, the U.S. Department of Transportation, and several state departments of transportation. Further, the TAD was reviewed by the Clean Air Scientific Advisory Committee's Air Monitoring and Methods Subcommittee. The state and local air agencies' adherence to the siting requirements in the CFR and their use of the TAD is evidenced by meta-data presented and discussed in the proposal and the associated docket memo. As a result of the diligence of state and local air agencies, and the support and oversight of the agency, the near-road network meets all siting requirements and the selection of sites for the current near-road network was carried out with a high degree of success. For example, as was noted in the proposal, 55 percent of the near-road sites are adjacent to one of the top five highest trafficked road segments in their respective CBSA, 71 percent are adjacent to one of the top 10 most highly trafficked roads, and 91 percent are adjacent to one of the top 25 most highly trafficked roads. As there are thousands of road segments within each CBSA, this means that virtually all near-road monitors are adjacent to one of the most heavily trafficked roads within their respective CBSAs. And, as noted in the EPA's analysis of the existing near-road monitoring data, if the measure of traffic is adjusted for the fleet mix to account for higher oxides of nitrogen (NOX) emissions from heavy-duty diesel vehicles, an even greater percentage of near-road monitors are adjacent to the road segments where NO2 exposure is expected to be highest. Moreover, traffic volume was just one criterion out of a number of factors, plus logistical limitations, that all had bearing on site selection. These data, along with all the other data presented in the proposal and the docket memo, are indicative of a successful network deployment.

The EPA notes that in general, ambient monitor placement is a balancing act of knowing where an ideal monitoring location might be versus the reality of actually being able to place and operate a monitor in a particular location. This concept applies to all ambient monitoring endeavors, as the physical process of siting a monitor is subject to a myriad of logistical influences including, but not limited to: Permissions for access; physical limitations on site placement including the immediate terrain, topography, or the roadway design of a target road in the specific case of near-road monitoring; safety considerations, which are particularly important and evident in near-road siting situations; and utilities availability. Considering the factors and influences involved in the near-road siting process and the known characteristics of the network, the EPA strongly asserts that the network is appropriately deployed and situated to provide measurements that are a good representation of maximum near-road NO2 concentrations that exist in a given CBSA, evidenced by meta-data presented and discussed in both the proposal and the docket memo.6

In response to the Public Health Organizations' statement that “new research examining the early results of some of these near-road monitors warn that the assumptions made in the initial siting decisions may not adequately reflect the wors[t] sources of highway emissions, even in major urban areas like Los Angeles,” the EPA would first like to point out that the research conducted for the referenced journal article did not utilize any data from the near-road NO2 network, nor did it directly measure NO2 during their on-road experiments. The data behind the referenced multi-pollutant research study were collected as part of an on-road mobile source emissions study primarily focused on improving understanding of the variability and influences on fleet-wide emissions via alternative methods of calculating emission factors. As such, the study does not indicate that information utilized in network siting decisions may not adequately reflect the worst sources of highway emissions. In fact, it does not even address near-road monitoring data from monitors installed to measure NO2 levels. Instead, the EPA believes the study reinforces the fact that the required consideration of a number of previously mentioned factors including traffic volume and fleet mix, which were important to the cited literature, were appropriate and critical to the near-road site selection process.

The third issue raised was the claim that empirical data relied on in the proposal were too limited. To initiate their argument, the Environmental Groups stated that the “. . . EPA has virtually no emissions data for CBSAs with populations under 1 million, so EPA's claim that `higher populated CBSAs,' i.e., CBSAs over 1 million people, will have `higher mobile source emissions' is unfounded.”

In response, the EPA notes that data presented and reviewed in the docket memo clearly show otherwise. The emissions data used in the docket memo analysis came from the 2011 National Emissions Inventory (NEI). The NEI mobile source data come from the EPA's Motor Vehicle Emissions Simulator (MOVES), which aggregates mobile source emissions data from the county level across the entire country. Therefore, the commenter's statement that the EPA has “virtually no emissions data” from CBSAs with populations less than 1 million persons, and their subsequent argument, is incorrect. Still regarding emissions data and analysis, later in their arguments the Environmental Groups state that “. . . NOX emissions coming from on-road mobile sources in areas with 1 and 2.5 million persons is nearly the same in areas with 500,000 to 1 million people,” suggesting that NOX emissions are nearly the same in the smaller populated CBSAs as they are in the larger ones, with a difference of only 3.2 percentage points. In the docket memo, the EPA presents NOX emissions inventory data, broken down by the categories of on-road mobile, non-road mobile, and all non-mobile source categories. These data are subsequently sorted into bins based on CBSA populations corresponding to the three phases by which the near-road network has been installed, plus a bin for all CBSAs with populations having less than 500,000 persons. The Environmental Group's comments are focused on the modest difference in percent contribution of on-road mobile sources to the total NOX emissions between the 500,000 to 1 million person CBSA bin (48.1 percent) and the larger CBSA bins (51.3 percent for CBSAs having between 1 million and 2.5 million persons and 55.3 percent for CBSAs having 2.5 million or more persons). However, the differences between these CBSA groups are significant when considering the actual amount of NOX in tons per year (tpy). The collective of CBSAs having 500,000 to 1 million persons have a NOX emissions profile where 48.1 percent of a total of 950,000 tpy are attributable to on-road mobile sources (i.e., 456,950 tpy). Meanwhile, the collective of CBSAs having 1 million to 2.5 million persons have a NOX emissions profile where 51.3 percent of 2,000,000 tpy are attributable to on-road mobile sources (i.e., 1,026,000 tpy) and the collective of CBSAs having 2.5 million persons or more have a NOX emissions profile where 55.3 percent of 7,500,000 tpy are attributable to on-road mobile sources (i.e., 4,147,500 tpy). It is clear by these data, and the analysis provided in the docket memo, that the larger CBSAs do in fact have much more on-road mobile source emissions than CBSAs with less than 1 million persons. Specifically, CBSAs with over 2.5 million persons have approximately 9 times more on-road mobile source NOX emissions in tpy than CBSAs with populations between 500,000 and 1 million, while the CBSAs with populations between 1 million and 2.5 million have 2.2 times more. These data support the conclusion that the larger populated CBSAs have greater potential for exposure due to marked increases in coincidence between emissions and population. See Docket Memo at pp. 9-11.

Concluding the Public Health Organizations' and Environmental Groups' arguments, they commented that the EPA relied on monitored near-road NO2 data from too few sites, particularly from CBSAs with less than 1 million persons, to substantiate the proposed rulemaking. The Public Health Organizations stated that “. . . even if the preliminary data indicated compliance with the standards, the sparse number [of monitoring sites] leaves open many questions. . . .” The Environmental Groups argued that only having near-road NO2 data from two CBSAs with populations under 1 million persons (Boise, Idaho and Des Moines, Iowa), “. . . are not sufficient data from which to conclude that any kind of trend exists or to make any prediction about what one-hour NO2 concentrations are likely to be reported in CBSAs with populations between 500,000 and 1 million; Boise and Des Moines alone are unlikely to be representative of all other CBSAs in this category.” The Environmental Groups go on to discuss an analysis of the available near-road data and state that variability in the collected data, particularly for the 98th percentile 1-hour daily maximum values (1-hour values), makes “. . . it exceedingly hard to predict whether an individual CBSA in either group [of different CBSA population sizes] would be likely to report high or low near-road NO2 concentrations based on its population alone,” and ultimately that “. . . EPA's own data show that less-populated areas are not significantly less likely to have high near-road NO2 concentrations (98th percentile one-hour daily max).”

Because Phases 1 and 2 of the network have nearly been fully deployed, there are sufficient data to analyze and to support a conclusion that the first two phases of the near-road monitoring network are sufficient to protect against risks associated with exposures to peak concentrations of NO2. Regarding the length of the data record, we must consider the fact that the agency has multiple years of complete data that have already been used to judge compliance against the annual standard. Between 2013 and 2015, there were 69 annual design value data points across 39 different CBSAs (some with two near-road sites) available for analysis and comparison to the NAAQS. Further, regarding hourly data during the same (2013-2015) time period, there were a similar number of 98th percentile 1-hour daily maximum concentration values available for review. There were four sites in four separate CBSAs (Boise, ID; Des Moines, IA; Detroit, MI; and St. Louis, MO) with 3 years' worth of complete data that allowed the calculation of design values for the hourly standard. Although the remaining sites did not have enough data for the hourly design value calculation, the available data still provided evidence of what hourly near-road NO2 concentrations look like across 1 or 2 years. All those data represent significant spatial representation nationally and across CBSAs of various population sizes, and were presented and discussed in the docket memo. (See Docket Memo, Figures 9, 10, and 11.) The data were ample enough to detect patterns and trends that provide an indication of whether or not near-road concentrations are threatening the NAAQS. Those indications, coupled with the understanding of NOx emissions and anticipated future emissions profiles, provided a strong basis for the proposal. We disagree that there are insufficient data on which to base our conclusions regarding the sufficiency of the near-road network. Commenters assert that the EPA has “virtually no emissions data” for CBSAs with populations under 1 million, which may have been intended to mean that the EPA has virtually no near-road NO2 air quality data for CBSAs with populations under 1 million. This is incorrect. As explained in the docket memo, EPA has complete data for a full year from two sites, one in Boise and one in Des Moines. The commenters did not provide any explanation to support their comment that there are not enough data.

Regarding specific comments on variability of some of the data, particularly in the hourly data across different near-road sites in different CBSAs across a range of population sizes, the EPA notes that such variability is to be expected in more highly time-resolved data. Further, as explained above, each near-road site is influenced by a number of factors, which all can contribute to inter-site variability. The Environmental Groups believe that the Boise and Des Moines CBSAs would not likely be representative of all other CBSAs of the same CBSA size class, without explanation. The EPA notes that no single CBSA is expected to be totally representative of any other individual CBSA. However, as presented in the proposal and the docket memo, despite the expected variability, there are relationships within the data that are evident when analyzing emissions, traffic data, measured concentration data, and CBSA populations. Particularly, higher populated CBSAs correspondingly have more vehicles, which in turn increases the availability of mobile source derived emissions that lead to increased opportunity for higher NO2 concentrations, particularly in the near-road environment. It is these relationships that lend to the concept that higher near-road NO2 concentrations are expected in more heavily populated CBSAs as compared to those with lesser populations.7

It is also critical to conduct an analysis of the available near-road data. The analysis of all these data, which include data from the most heavily populated CBSAs and two CBSAs having populations between 500,000 and 1 million persons, reveals that there are no design values for either the annual or hourly NAAQS, or even a single 98th percentile 1-hour daily maximum value, that are approaching or exceeding the NAAQS. The highest recorded values throughout the 2013-2015 time period, analyzed and presented in the docket memo, were an annual average of 27 ppb in Los Angeles and an 98th percentile 1-hour value of 72 ppb from an incomplete year of data in New York City. In comparison, the NO2 annual standard level is 53 ppb and the 98th percentile 1-hour daily maximum standard level averaged over 3 years is 100 ppb. The fact that no data collected to date have exceeded or are threatening to the NAAQS is paramount to the reasoning behind the approach to revise network requirements. There are no compelling concentration data or meta-data that indicate that the smaller CBSAs would be expected to have near-road NO2 concentrations at or above those measured in more heavily populated CBSAs that have sites proximate to more heavily trafficked roads.

Further, the EPA expects a continuation in the reduction of on-road mobile source emissions on a per vehicle basis as a result of the implementation of mobile source standards such as the Tier 3 engine and fuel standards, which was echoed in the public comments. These continuing emission reductions should reduce the amount of measured NO2 in the near-road environment, although other factors such as changes in traffic volume can impact those reductions.

Finally, the EPA notes that EPA Regional Administrators have the authority to work with state and local air monitoring agencies to require monitoring above the minimum requirements as needed to address a situation where near-road NO2 concentrations are suspected to be approaching or exceeding the NAAQS. Accordingly, near-road monitoring could subsequently be required in smaller CBSAs should circumstances indicate the need to provide additional characterization beyond the monitoring provided by Phases 1 and 2 of the network. This Regional Administrator authority serves as an effective backstop against any unusual situation that could occur where monitoring might be warranted in an area that is not subject to minimum monitoring requirements.

Other comments received were outside the scope of this rule and not discussed in this preamble.

An analysis of available near-road NO2 monitoring data indicates that air quality levels in the near-road environment are well below the NO2 NAAQS. Based on the analysis of available concentration data, as well as related emissions, traffic, and network metadata, the EPA anticipates that measured near-road NO2 concentrations in relatively smaller CBSAs (i.e., CBSAs with populations less than 1,000,000 persons) would exhibit similar, and more likely, lower concentrations, than what is being measured at existing near-road NO2 sites in larger urban areas. In consideration of the data presented and reviewed in the proposal and the public comments received on the proposal, the EPA is finalizing, as proposed, the removal of monitoring requirements for near-road NO2 monitors in CBSAs having populations between 500,000 and 1,000,000 persons, also known as Phase 3 of the near-road NO2 network. The agency is also finalizing, as proposed, the removal of the requirement for a second near-road NO2 monitor in any CBSA having 500,000 or more persons that also had one or more road segments with 250,000 or greater AADT counts. The revised requirement for a second near-road NO2 monitor will only apply to CBSAs having 1,000,000 or more persons with a road segment of 250,000 or greater AADT counts.

This action is not a significant regulatory action and was, therefore, not submitted to the Office of Management and Budget (OMB) for review.

This action does not impose an information collection burden under the PRA. The final revisions do not add any information collection requirements beyond those imposed by the existing NO2 monitoring requirements.

I certify that this action will not have a significant economic impact on a substantial number of small entities under the RFA. In making this determination, the impact of concern is any significant adverse economic impact on small entities. An agency may certify that a rule will not have a significant economic impact on a substantial number of small entities if the rule relieves regulatory burden, has no net burden or otherwise has a positive economic effect on the small entities subject to the rule. This action will remove a sub-set of the current air monitoring requirements and, therefore, relieve state and local air monitoring agencies from having to provide evidence of compliance with the NO2 NAAQS in the near-road environment in CBSAs with less than 1,000,000 persons. We have, therefore, concluded that this action will relieve regulatory burden for all directly regulated small entities.

This action does not contain an unfunded mandate of $100 million or more as described in UMRA, 2 U.S.C. 1531-1538, and does not significantly or uniquely affect small governments. This action imposes no enforceable duty on any state, local or tribal governments or the private sector. This action will reduce the number of required near-road NO2 monitors to be operated by state and local air monitoring agencies.

This action does not have federalism implications. It will not have substantial direct effects on the states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government.

This action does not have tribal implications, as specified in Executive Order 13175. This final rule imposes no requirements on tribal governments. Thus, Executive Order 13175 does not apply to this action.

The EPA interprets EO 13045 as applying only to those regulatory actions that concern environmental health or safety risks that the EPA has reason to believe may disproportionately affect children, per the definition of “covered regulatory action” in section 2-202 of the Executive Order. This action is not subject to Executive Order 13045 because it does not concern an environmental health risk or safety risk.

This action is not subject to Executive Order 13211, because it is not a significant regulatory action under Executive Order 12866.

This action does not involve technical standards.

The EPA believes the human health or environmental risk addressed by this action will not have potential disproportionately high and adverse human health or environmental effects on minority, low-income or indigenous populations. The results of the network and data evaluation are contained in the Near-road NO2 Network and Data Analysis docket memo, which provides a review and analysis of the characteristics of the existing near-road NO2 monitoring network and the relationships between NO2 emissions, population, traffic, and NO2 concentration data. Further, this rule does not modify the existing requirements for near-road monitors required in CBSAs having 1,000,000 or more persons, area-wide NO2 monitors, or monitoring of NO2 in areas with susceptible and vulnerable populations.

This action is subject to the Congressional Review Act (CRA), and the EPA will submit a rule report to each House of Congress and to the Comptroller General of the United States. This action is not a “major rule” as defined by 5 U.S.C. 804(2).

For the reasons stated in the preamble, the Environmental Protection Agency is amending title 40, chapter I of the Code of Federal Regulations as follows:

The dolphin and wahoo fishery of the Atlantic is managed under the FMP. The FMP was prepared by the Council and implemented through regulations at 50 CFR part 622 under the authority of the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Steven Act).

On June 30, 2016, NMFS published a proposed rule for Regulatory Amendment 1 and requested public comment (81 FR 42625). The proposed rule and Regulatory Amendment 1 outline the rationale for the action contained in this final rule. A summary of the action implemented by Regulatory Amendment 1 and this final rule is provided below.

This final rule establishes a commercial trip limit for dolphin for vessels that have a Federal commercial permit for Atlantic dolphin and wahoo.

Currently, no commercial trip limit exists for vessels that possess a Federal commercial permit for Atlantic dolphin and wahoo. However, there is a commercial trip limit of 200 lb (91 kg) of dolphin and wahoo, combined, for vessels that do not have a Federal commercial permit for Atlantic dolphin and wahoo but do have a Federal commercial permit in any other fishery, provided that all fishing and landings from that trip occur north of 39° N. lat. (50 CFR 622.278(a)(2)). This final rule establishes a commercial trip limit of 4,000 lb (1,814 kg), round weight, for the dolphin commercial sector in the Atlantic, once 75 percent of the commercial ACL is reached. This trip limit remains in effect until the end of the fishing year or until the commercial ACL is met, whichever comes first. This trip limit applies to vessels that have a Federal commercial permit for Atlantic dolphin and wahoo, provided that the vessel is not operating as a charter vessel or headboat. There will be no applicable trip limit for the dolphin commercial sector in the Atlantic prior to 75 percent of the commercial ACL being reached. The Council determined that establishing this commercial trip limit would reduce the chance of early closures during the fishing year as a result of the accountability measures being triggered, and thereby reduce the severity of any economic or social impacts as a result of a commercial sector closure.

NMFS received four comments on the proposed rule and Regulatory Amendment 1. One comment was outside the scope of the amendment and two were in support of the amendment as proposed. Those comments are not addressed below. The remaining single commenter opposed the management actions in the proposed rule and Regulatory Amendment 1; summaries of and responses to the comments in opposition to the proposed rule and Regulatory Amendment 1 are below.

Comment 1: The commercial trip limit selected in Regulatory Amendment 1 is not supported by the best available science, as mandated by the Magnuson-Stevens Act. No peer-reviewed stock assessment has ever been conducted for dolphin. Dolphin is the highest priority in the Council's list of species in need of a peer-reviewed stock assessment yet no Southeast Data, Assessment, and Review (SEDAR) assessment has been scheduled or requested. NMFS should conduct a stock assessment of dolphin in the Atlantic before implementing Regulatory Amendment 1.

Response: NMFS disagrees that dolphin needs to be assessed before implementing this amendment and has certified that Regulatory Amendment 1 is based on the best scientific information available. Although dolphin is not currently scheduled for a stock assessment, it is a short-lived, highly productive species that is not considered to be vulnerable to overfishing. The decision to manage the fishery represented a precautionary and risk-averse approach to management. The Report to Congress on the Status of U.S. Fisheries indicates that dolphin is not overfished and is not undergoing overfishing. The Southeast Fisheries Science Center listed dolphin as a stock assessment priority; however, the Council did not include dolphin in its list of long-term priorities due to the need to revise assessments that had already been completed with updated data from the Marine Recreational Information Program. Thus, dolphin is not the highest priority of species in need of a peer-reviewed stock assessment and the Council and NMFS need not await a stock assessment to proceed with the Regulatory Amendment 1.

Comment 2: The dolphin fishery is in need of management measures that will, when implemented, eliminate the need for commercial trip limits. NMFS should only implement Regulatory Amendment 1 as a temporary measure to give the Council and NMFS time to develop new management measures based on a new stock assessment. Therefore, a sunset date to the trip limit action should be included in Regulatory Amendment 1, to allow the commercial trip limits for the longline component of the commercial sector to be valid for a set number of years.

Response: Regulatory Amendment 1 establishes a dolphin commercial trip limit of 4,000 lb (1,814 kg), round weight, once 75 percent of the commercial ACL is reached. The Council did not consider a sunset date for the action in this amendment. In the future, if deemed necessary, the Council could modify or remove the trip limit.

Comment 3: The dolphin commercial trip limit will negatively impact commercial fishermen in the North Atlantic more significantly than fishermen in the Mid-Atlantic or South Atlantic as a result of dolphin's migratory patterns, in violation of National Standard 4. The fishing year should be changed from beginning on January 1 to begin on June 1 to allow the fishermen in the North Atlantic better access to the resource.

Response: NMFS disagrees. The amendment does not violate National Standard 4 because it is intended to lengthen the fishing year for all commercial fishermen fishing in the Atlantic. The Council did not consider revising the fishing year in Regulatory Amendment 1. In the future, if deemed necessary, the Council could revise the fishing year.

Comment 4: This amendment violates National Standard 9 and “no less than 4 U.N. resolutions and the UN FAO Code of Conduct for Responsible Fisheries” because the implementation of commercial trip limits will cause an increase in regulatory discards.

Response: NMFS disagrees. Marine fisheries in the United States are scientifically monitored and regionally managed under a number of requirements, including the ten national standards in the Magnuson-Stevens Act. The National Standards are requirements that must be followed in any FMP to ensure sustainable and responsible fishery management. When reviewing FMPs, FMP amendments, and regulations, the Secretary of Commerce must ensure that they are consistent with the National Standards. National Standard 9 states: Conservation and management measures shall, to the extent practicable, (a) minimize bycatch and (b) to the extent bycatch cannot be avoided, minimize the mortality of such bycatch. The dolphin and wahoo fishery is managed under the FMP which is consistent with the National Standards. As discussed in the bycatch practicability assessment included in the Regulatory Amendment, the magnitude of discards in the dolphin and wahoo fishery is small, and bycatch is believed to be minimal in both the commercial and recreational sectors. Action was taken in the original FMP to reduce bycatch by prohibiting the use of surface and pelagic longline gear for dolphin and wahoo within any “time or area closure” closed to the use of pelagic gear for highly migratory pelagic species in the Council's area of jurisdiction. Although this action may increase the regulatory discards when the commercial trip limit is triggered, any increase is likely to be minimal.

The commenter did not provide any information on, or citation to, the United Nations resolutions that it believes the rule violates, and thus NMFS cannot evaluate the comment that the rule is inconsistent with those resolutions. However, to the extent that those resolutions seek to minimize bycatch, this final rule is consistent with them. As explained above, although the final rule may increase regulatory discards when the rule is implemented, NMFS does not believe those increases in regulatory discards violate National Standard 9 or other efforts to minimize bycatch.

In addition, with respect to the comment that the rule violates the United Nation's 1995 Code of Conduct for Responsible Fisheries (CCRF), NMFS disagrees. Similar to National Standard 9, the CCRF seeks to minimize bycatch. As explained above, the final rule is consistent with National Standard 9 and thus is consistent with other initiatives to minimize bycatch, including the CCRF.

Comment 5: If trip limits are implemented, all forms of mortality, including regulatory discards, must be accounted for accurately in order to determine the effect of overall mortality on stock status. It is essential that NMFS collect data on discards of dolphin with the implementation of a commercial trip limit.

Response: As described in the response to comment 4, the bycatch in the dolphin fishery is minimal. Information on dolphin landings and discards are collected through a variety of ways in the Atlantic. Commercial dolphin fishermen who are selected by the NMFS Science and Research Director are required to maintain and submit fishing records. Commercial dolphin fishermen are also required to submit logbooks with trip and effort information. Currently, discard data are collected using a supplemental form that is sent to a stratified random sample of 20 percent of the active Federal dolphin and wahoo commercial permit holders in the dolphin and wahoo fishery. For the recreational sector, estimates of the number of recreational discards are available from the Marine Recreational Information Program and the NMFS Southeast Headboat Survey.

Additionally, the Council is currently developing the Bycatch Reporting Amendment to improve bycatch reporting in all of their managed fisheries. This amendment is intended to improve data collection on discards, including regulatory discards.

The Regional Administrator, Southeast Region, NMFS has determined that this final rule is necessary for the conservation and management of Atlantic dolphin and is consistent with Regulatory Amendment 1, the FMP, the Magnuson-Stevens Act, and other applicable law.

This final rule has been determined to be not significant for purposes of Executive Order 12866.

The Magnuson-Stevens Act provides the statutory basis for this rule. No duplicative, overlapping, or conflicting Federal rules have been identified. In addition, no new reporting, record-keeping, or other compliance requirements are introduced by this final rule.

The Chief Counsel for Regulation of the Department of Commerce certified to the Chief Counsel for Advocacy of the Small Business Administration (SBA) during the proposed rule stage that this rule would not have a significant economic impact on a substantial number of small entities. The factual basis for this determination was published in the proposed rule and is not repeated here. NMFS did not receive any comments from SBA's Office of Advocacy or the public on the certification in the proposed rule.

On December 29, 2015, NMFS issued a final rule establishing a small business size standard of $11 million in annual gross receipts for all businesses primarily engaged in the commercial fishing industry (NAICS 11411) for RFA compliance purposes only (80 FR 81194, December 29, 2015). The $11 million standard became effective on July 1, 2016, and is to be used in place of the SBA's current standards of $20.5 million, $5.5 million, and $7.5 million for the finfish (NAICS 114111), shellfish (NAICS 114112), and other marine fishing (NAICS 114119) sectors of the U.S. commercial fishing industry in all NMFS rules subject to the RFA that are published after July 1, 2016. Id. at 81194.

Pursuant to the RFA, and prior to July 1, 2016, a certification was developed for this regulatory action using SBA's size standards. NMFS has reviewed the analyses prepared for this regulatory action in light of the new size standard. All of the entities directly regulated by this regulatory action are finfish commercial fishing businesses and were considered small under the previously applicable SBA size standards. These commercial fishing businesses will not exceed the new threshold standard for small businesses, and thus they all will continue to be considered small under the new standard. Thus, NMFS has determined that the new size standard does not affect analyses prepared for this regulatory action.

The Chief Counsel for Regulation of the Department of Commerce hereby reaffirms that the rule will not have a significant economic impact on a substantial number of small entities. Because this final rule, if implemented, will not have a significant economic impact on a substantial number of small entities, a final regulatory flexibility analysis is not required and none has been prepared.

For the reasons stated in the preamble, NMFS amends 50 CFR part 622 as follows: